Microsoft’s acquisition of Activision Blizzard could face another investigation from UK antitrust regulators. Both companies have suspended legal proceedings related to their merger in an effort to address concerns raised by the Competition and Markets Authority, but none appear sufficient to appease its concerns about cloud gaming market future viability.
In April, the CMA blocked Microsoft’s plan to acquire Activision Blizzard in what would have been one of the largest gaming industry acquisitions ever. They voiced concerns that combining would give one company an unfair edge over rivals and deny gamers access to games on other platforms – including Sony’s PlayStation. They also believed such an acquisition would give one firm control of esports competitions, an emerging aspect of video game culture with significant potential revenue opportunities.
Microsoft and Activision were shocked by the Competition and Markets Authority (CMA) decision and immediately began exploring ways to restructure the deal in order to overturn it. Microsoft claims they offered solutions designed to address their concerns; however, CMA warned them they may conduct further examination of any proposal put forth by Microsoft and Activision.
CMA officials estimate that an investigation of any proposed remedies will take “significantly longer” than regular investigations; as a result, months could pass before they reach a verdict on whether to approve or disapprove a merger deal. While approval from CMA remains possible at some point in time, its chances are decreasing rapidly.
If the CMA blocks Microsoft’s deal, it would mark its first major setback since a US court found its planned Windows update did not violate consumer privacy laws in June 2022. After that ruling, its share price took an abrupt plunge; today it trades at two year low levels.
With approval from both the US and EU for their deal, Microsoft and Activision must now focus on submitting a proposal that meets with UK watchdog approval by July 18. If they cannot do this by then, a $3.6 billion breakup fee will be assessed against them.
CMA announced in a statement that it is ready to consider any proposals that might address its concerns. While merging parties typically cannot propose new remedies after receiving their final report from CMA, this watchdog still allows them to restructure their transactions if necessary. Microsoft and Activision must find a way to modify their deal that is acceptable to both regulators in Europe as well as to the Competition Market Authority (CMA), making sure it aligns with solutions already approved by these authorities – which may prove challenging considering that online gambling in the UK is such an important industry sector. CMA’s warning also serves as a reminder that Microsoft and Activision will likely face lengthy reviews process in other countries before their deal can go forward and close successfully.