On April 26, 2023, the Competition and Markets Authority (CMA) of the United Kingdom announced its decision to block Microsoft’s $69 billion acquisition of Activision Blizzard over concerns that it would negatively impact cloud gaming. While the regulator had previously resolved its concerns about the consoles market dominated by Sony’s PlayStation and Microsoft’s Xbox, it deemed the merger would impede competition in the cloud gaming sector. In response, Microsoft expressed its full commitment to the acquisition and plans to appeal the decision.
The appeal process involves Microsoft seeking recourse from the Competition Appeal Tribunal (CAT), an independent judicial body. The CAT will review the CMA’s decision-making process, rather than the merits of the merger itself. However, Microsoft will not be able to offer new remedies at this stage, including keeping Activision content off its Xbox Game Pass subscription service in Britain, as some analysts suggest.
If Microsoft wins the appeal, the Tribunal will return the case to the CMA for further review. Microsoft can then present new concessions. However, the CMA is likely to reach the same conclusion unless there is a material change in circumstances or new evidence. The appeal process could take many months, with the CAT aiming to deal with straightforward cases in under nine months, according to legal experts.
Aside from the UK ban, European regulators are set to rule on the deal by May 22, while the US Federal Trade Commission filed a complaint to block the acquisition. If either of these regulators prohibits the merger, Microsoft may have to abandon the deal altogether, even if it means paying Activision a hefty $3 billion break fee.
It is worth noting that the CMA’s decision to block the Microsoft-Activision deal is not without precedent. Meta (formerly Facebook) appealed the CMA’s decision to block its acquisition of Giphy in 2021, but the regulator upheld the decision after considering new submissions. In another instance, FNZ appealed the CMA’s block on its merger with rival GBST, and the regulator sent the case back for reconsideration after identifying potential errors in its investigation.
In conclusion, Microsoft’s appeal to the CAT presents a potential route for the tech giant to pursue its acquisition of Activision Blizzard. However, the outcome of the appeal and the decisions of other regulators remain uncertain, making the future of the $69 billion deal unclear.
