Microsoft formally files appeal against UK CMA decision to block Activision deal

Microsoft formally files appeal against UK CMA decision to block Activision deal
Ben Borthwick Updated on by

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Update 24/5: Microsoft has now filed an official legal challenge appealing the UK’s Competition and Market Authority’s decision to block their takeover of Activision Blizzard.

As reported by Bloomberg, the appeal was filed earlier today, with the decision set to be reviewed by the UK’s Competition Appeal Tribunal. The news comes following the European Commission approving the deal, and the CMA facing questions from UK MPs as a result. The Tribunal typically apparently takes around nine months to make a decision in most cases, although Activision CEO Bobby Kotick had previously mentioned he believes Activision and Microsoft will be able to get the process fast tracked. Still, it’ll likely be some time before a full conclusion to the deal is reached.

Original story follows: The UK’s Competition and Markets Authority has decided to block Microsoft’s proposed $68.7 billion USD deal to buy Call of Duty maker Activision in a landmark ruling.

Explaining the reasoning behind their decision, the CMA said that it had come to the decision to block the deal due to “concerns the deal would alter the future of the fast-growing cloud gaming market, leading to reduced innovation and less choice for UK gamers over the years to come.”

In a full press release, the CMA claimed that Microsoft’s proposals “failed to effectively address the concerns in the cloud gaming sector outlined in the Competition and Markets Authority’s provisional findings published in February.” These provisional findings also suggested that Call of Duty – a big sticking point in the negotiations – could be separated from the rest of the deal.

According to the report, the CMA felt that “the deal would reinforce Microsoft’s advantage in the market by giving it control over important gaming content such as Call of Duty, Overwatch, and World of Warcraft. The evidence available to the CMA indicates that, absent the merger, Activision would start providing games via cloud platforms in the foreseeable future” and that “Allowing Microsoft to take such a strong position in the cloud gaming market just as it begins to grow rapidly would risk undermining the innovation that is crucial to the development of these opportunities.”

Microsoft previously submitted their proposals to address some of these concerns following the February report, however – the CMA said these proposals “contained a number of significant shortcomings connected with the growing and fast moving nature of cloud gaming services.” The CMA also said that Microsoft’s proposed solutions didn’t sufficiently cover different cloud gaming service business models, or provide options to offer versions of Activision games outside of Windows operating systems on PC.

“Accepting Microsoft’s remedy would inevitably require some degree of regulatory oversight by the CMA. By contrast, preventing the merger would effectively allow market forces to continue to operate and shape the development of cloud gaming without this regulatory intervention.”

The announcement concluded with a statement from Martin Coleman, who chaired the independent panels of experts on the investigation. “Microsoft engaged constructively with us to try to address these issues and we are grateful for that, but their proposals were not effective to remedy our concerns and would have replaced competition with ineffective regulation in a new and dynamic market. Cloud gaming needs a free, competitive market to drive innovation and choice. That is best achieved by allowing the current competitive dynamics in cloud gaming to continue to do their job.”

Microsoft has said it will appeal the decision – in a statement from Microsoft’s Vice Chair Brad Smith. “We remain fully committed to this acquisition and will appeal. The CMA’s decision rejects a pragmatic path to address competition concerns and discourages technology innovation and investment in the United Kingdom.”

“We have already signed contracts to make Activision Blizzard’s popular games available on 150 million more devices and we remain committed to reinforcing these agreements through regulatory remedies. We’re especially disappointed that after lengthy deliberations, this decision appears to reflect a flawed understanding of this market and the way the relevant cloud technology actually works.”

Activision Blizzard CEO Bobby Kotick also sent out a statement to staff in response to today’s decision. “Alongside Microsoft, we can and will contest this decision, and we’ve already begun the work to appeal to the UK Competition Appeals Tribunal. We’re confident in our case because the facts are on our side: this deal is good for competition.”

“The UK hopes to grow its leadership position in technology, and a combined Microsoft-Activision would accomplish exactly that. At a time when the fields of machine learning and artificial intelligence are thriving, we know the UK market would benefit from Microsoft’s bench strength in both domains, as well as our ability to put those technologies to use immediately. By contrast, if the CMA’s decision holds, it would stifle investment, competition, and job creation throughout the UK gaming industry.”

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