The U.K. Competitions and Markets Authority, who have been fiercely opposed to Microsoft's $69 billion acquisition of Activision Blizzard, rejected the deal in April. Nevertheless, they have expressed their willingness to consider any plans from Microsoft to modify the terms of the transaction in order to resolve the authority's concerns. This announcement follows the U.S. judge's refusal of the Federal Trade Commission's plea for a temporary order to hinder Microsoft from finishing the purchase.
In April, the U.K. Competitions and Markets Authority, who had been the most fervent critic of Microsoft's proposed $69 billion acquisition of gaming corporation Activision Blizzard, ruled against the deal. Yet now, following the U.S. judge's denial of the Federal Trade Commission's request for a preliminary injunction to stop the purchase, the regulator has suggested it may be willing to revive negotiations with Microsoft. The question remains, however, as to what the Redmond giant can provide the CMA, considering that all past attempts to reach agreements had been unsuccessful.
The U.K. CMA effectively prevented the acquisition in April, expressing worries that the treaty had the potential to create issues with competition in the developing cloud gaming market. Much like other regulators, the CMA was concerned that Microsoft could make Activision's games exclusive to its own platforms. Cloud gaming is a relatively new technology that allows gamers to access games from remote servers, streaming them like they would a show on Netflix. Still in its maiden stages, Microsoft is taking a gamble on it turning into a widely accepted way of playing games. In April, the CMA commented: "Granting Microsoft such a commanding position in the rapidly growing cloud gaming sector may jeopardize the innovation that's essential for the growth of these opportunities."
The CMA had been firmly advocating that Microsoft does not purchase Activision — and its announcement to soften its attitude has taken many by surprise.In its statement, the CMA indicated it would allow for discussions with Microsoft to contemplate schemes to settle the disagreement.
The CMA spokesperson told CNBC via email on Tuesday that they were "ready to consider any proposals from Microsoft to restructure the transaction in a way that would address the concerns set out in their Final Report." To allow the regulator to focus on this, Microsoft and Activision have consented to a stay of litigation in the UK, for which they have jointly requested the Competition Appeal Tribunal.The CMA could have taken legal action, though this could have been a costly and lengthy process and the watchdog could have been significantly harmed if they lost the case.Alex Haffner, a competition lawyer at Fladgate, suggested that the CMA had been compelled to negotiate with Microsoft, rather than pursue legal action, saying that the regulator had been "backed into a corner" and had received "a lot of heat". He added that this could be seen as either "face-saving" or "pragmatic", depending on the perspective.
The CMA, Microsoft and Activision are now likely to attempt to find a compromise to satisfy the regulator’s worries so they can reach an agreement. Microsoft might attempt to make additional assurances to the CMA. There is yet to be established what those promises would be, but Haffner mentioned they should be "in line with the worries raised." Haffner told CNBC that a period of negotiation will now ensue that will need to be settled speedily. "We will resolve it within a week or so," he said. Microsoft must conclude the deal by the July 18 deadline.
Microsoft proposed to the U.K. regulator several concessions, including making certain games available on other platforms for a set period. For instance, it declared in February it would provide Xbox PC games via Nvidia's cloud gaming service. Additionally, Microsoft reached a ten-year agreement with rival Nintendo, which enabled Call of Duty to be accessible on the Japanese company's systems the same day as the Xbox. To satisfy European Union regulators, Microsoft declared it would offer royalty-free licenses to cloud gaming platforms to stream Activision games for people who had bought them. Nevertheless, the CMA rejected the offers, since they would be difficult to enforce and would probably not consider alterations in the cloud market. Therefore, Microsoft will have to find a different licensing concession.
In February, the CMA put forward potential solutions to Microsoft, one of which was the sale of its Call of Duty business. Microsoft President Brad Smith, however, deemed this option unfeasible. Due to this, Wedbush Securities analyst Dan Ives commented on Wednesday that a divesture of some kind can be expected by Microsoft to placate the CMA. This could involve Microsoft carving out its Game Pass subscription service in the U.K. which grants users access to numerous games on Xbox and PC.
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