Microsoft and the UK’s antitrust regulator, the Competition and Markets Authority (CMA), have been granted a two-month pause on their legal battle over Microsoft’s proposed $68.7 billion acquisition of Activision Blizzard. The pause was granted by Judge Marcus Smith of the Competition Appeal Tribunal (CAT), who wants the CMA to provide evidence justifying the adjournment application and detail any new consultation process it plans to undertake.
The CMA had raised concerns over the proposed acquisition, particularly regarding cloud gaming. Microsoft had appealed the CMA’s decision, and the CAT was scheduled to hear the case on July 28th. However, after the Federal Trade Commission’s (FTC) attempt to stall the acquisition in the US, the CMA agreed to a pause in the legal battle. Microsoft, the CMA, and Activision all requested more time, and the CAT approved the request.
During the hearing, CMA lawyer David Bailey stated that the FTC’s court loss had no impact on the CMA’s decision to review a new proposal from Microsoft. Both Microsoft and the CMA expressed confidence that a restructured transaction could address the CMA’s concerns. However, it was revealed that Microsoft had yet to submit an amended proposal to the CMA, even though the merger deadline was approaching.
If the issues are not resolved by the deadline, Microsoft and Activision may have to agree to an extension of their current agreement or renegotiate the terms. Alternatively, Activision can choose to walk away from the deal and receive a $3 billion breakup fee from Microsoft.
To satisfy the CMA’s concerns, Microsoft may consider selling some cloud gaming rights in the UK. Microsoft has already signed deals with third-party cloud gaming companies to offer its games on their platforms, which was sufficient for the European Union’s approval of the acquisition.
While the CMA dispute remains, the FTC is scheduled to hold its own evidentiary hearing over the acquisition starting on August 2nd. The FTC had sought a preliminary injunction to halt the deal until the case could go to trial, but their request was unsuccessful.
Given these legal challenges, Microsoft and Activision will likely be eager to finalize the acquisition by early August. Earlier suggestions of finding a workaround to continue business in the UK despite the CMA dispute seem unlikely at this point, as all parties are focused on finding an amicable resolution. The CMA has until August 29th to make a final decision on the case.
Overall, the pause in the legal battle between Microsoft and the CMA provides an opportunity for both parties to resolve concerns over the proposed acquisition of Activision Blizzard. With the CAT’s approval, the CMA now needs to provide evidence justifying the adjournment and detail a new consultation process. Meanwhile, the FTC’s separate hearing also looms, adding to the complexity of the situation. The coming weeks will be crucial in determining the future of this major gaming industry deal.
