To acquire Activision Blizzard, Microsoft still needs to circumvent the UK CMA block. Contrary to custom, the group and the authority give each other extra time to find an amicable agreement.
In his $69 billion quest to afford Activision Blizzard, Microsoft has been able to convince (or bend) the competition authorities of the main markets around the world. The American giant nevertheless still faces the blocking of the Competition and Markets Authority (CMA) which rejected the proposed merger in the United Kingdom. As we know, Microsoft appealed the CMA’s decision before the Competition Appeal Tribunal (CAT) whose decision was expected on July 28 – in order to validate or reject the negative decision of the CMA.
Microsoft and the CMA nevertheless filed a joint motion before the appeals court to adjourn the decision, in order to give themselves more time to continue negotiating. According to Bloomberg, Judge Marcus Smith said he was “willing to postpone next week’s hearing provided that the CMA provides the reasons why it considers that significant changes (…) would be likely to justify the request for ‘adjournment’.
A not insignificant negotiation for the CMA
Beyond the delay itself, the mere request is significant in that according to Bloomberg, the CMA has traditionally been reluctant to negotiate – it makes its decisions and those decisions are challenged in appeal courts but it only compromises rarely with the actors in his files.
In the present case, the fact that the blocking of the FTC merger in the United States has been challenged by the American courts clearly leads the British CMA to doubt the solidity of its case. The course of the proceedings in the United States may be leading the CMA to seek an arrangement rather than submit to an appeal decision which it is likely to lose.
And for its part, Microsoft is probably also more inclined to find a compromise negotiated by its teams rather than relying on the court, with the risk of having to abandon the merger or cease its activities in the United Kingdom. Thus, according to the CMA’s attorneys, “Based on discussions to date, both parties – Microsoft and the CMA – are satisfied that a restructured transaction is capable of addressing the concerns identified by the CMA.”
THE cloud gaming in the balance
What about this “redesign” of the merger currently being negotiated between Microsoft and the CMA? At this time, neither of the two players is commenting on it, but to please the CMA, Microsoft could for example be led to sell all or part of its activities related to the cloud gaming in the United Kingdom – Microsoft’s dominant position in the software sector cloud gaming across the Channel is the main concern of the CMA. Whether the stakes justify the cost remains to be seen.
Microsoft will also have to renegotiate its acquisition agreement with Activision Blizzard. According to the original terms of the acquisition contract, Microsoft had until today July 18 to finalize its purchase, under penalty of activating a forfeiture clause of three billion dollars if the operation fell through. It must be admitted that Microsoft has made many efforts to finalize the transaction which is now coming to an end (the fact that the operation has not yet been completed is not linked to a renunciation by Microsoft). We therefore bet that the American giant will manage to find an arrangement with (its future subsidiary) Activision Blizzard – after having bent the authorities of most of the major nations of the planet.