This past Wednesday the United Kingdom’s Competition and Markets Authority (CMA) voted to block Microsoft’s proposed acquisition of video game publisher Activision Blizzard (ATVI) on the grounds of (a projected future of) cloud gaming, in what may end up being a fatal blow to the deal worth just shy of $70 billion. For now, Microsoft (MSFT) and Activision plan to continue to move forward, entering an appeal of the decision, albeit the path to closing the deal is now set to be a significantly longer road ahead.
The CMA decision can be appealed to the UK’s Competition Appeal Tribunal (CAT), which generally aims to complete “straightforward cases in less than nine months.” If the appeal is successful, the proposed acquisition would then be sent back to the CMA to fix any issues and potentially approve proposed remedies. There is a good chance that we could be hearing about this deal at the center of each week’s video game news cycle for yet another full year. If the deal is not closed by July 18, 2023 (which it is very likely that it won’t be), Microsoft will owe Activision a $3 billion breakup fee, though it is likely that both parties will renegotiate a new contract if they still hope to see the deal through.
So what happens if the appeal fails and the merger remains blocked in the UK? If MSFT is able to gain approval in both the EU and the US (in addition to many other global markets that have already approved the deal with no stipulations), then they could look to either (A) pull out of the UK in some way (very unlikely) or (B) further quell the CMA’s concerns by signing a long-term contract to keep Activision Blizzard games off of Microsoft’s cloud service (or possibly Game Pass entirely) in the UK. The true loser of satisfying the CMA’s concerns would unfortunately be UK gamers, the same people whom the CMA should be ruling in favor of.
Next up: EU regulators are set to issue their decision on the proposed acquisition later this month on May 22nd. The majority opinion among analysts is that they will approve the deal, though with that being said many of the same analysts also expected the UK’s CMA to turn the corner and approve the deal as well after their arguments surrounding Call of Duty fell through.
Image from: uk.gov
