Microsoft's chances of clearing Activision Blizzard deal in US and Europe to fade away if UK watchdog decides to block it

Microsoft’s $68.7 billion acquisition of Activision Blizzard is still under regulatory pressure in both the US and Europe. And a recent report claims that the Redmond-based company expects the UK agency to oppose the record-breaking deal.

Why is CMA approval so important for Microsoft?

Update (February 7): Microsoft has eventually corrected the NYT story, saying that “it believes it has a strong case in Britain and has not predetermined, nor been advised by its lawyers, that the merger will be blocked.”

Original article (February 6): The New York Times first reported Microsoft’s concerns, citing four people familiar with the matter. The company expects the UK’s Competition and Markets Authority (CMA) to try to block the transaction.

The European Commission, which is also reviewing the Activision Blizzard deal, is “open to potenial remedies”. So Microsoft still hopes to “convince both Britain and the European Union to accept its concessions and approve the deal.”

This would make it easier for the company to then reach a similar agreement with the US Federal Trade Commission (FTC), which previously sued to block the $68.7 billion acquisition. The final hearings in the case are set for August 2023, a few months after the deadline for Microsoft’s bid to acquire Activision Blizzard expires.

According to another report from Bloomberg, getting the deal approved in the UK is critical for Microsoft. “The CMA’s decision is key because if it chooses to block the deal, there is little recourse for the companies — UK courts rarely overturn a CMA merger decision,” Bloomberg Intelligence analyst Jennifer Rie said, adding that it is unlikely that the transaction will be cleared unconditionally.

The CMA is expected to issue its findings in the coming days. Both the FTC and the European Commission will rely on this information when making a decision on the case. So the fate of the Activision Blizzard deal is now in the hands of the UK antitrust watchdog.

Major regulatory concerns over the Activision Blizzard acquisition

• The FTC is concerned that Microsoft will gain control over top gaming franchises like Call of Duty, Candy Crush, and World of Warcraft. The agency also thinks that this deal will give the company all the means and motives to “manipulate pricing, degrade game quality and player experience on rival consoles.”
• After opening an in-depth investigation into the case, the European Commission said the Activision Blizzard deal could hurt competition in the games market and affect Microsoft’s rivals in the area of PC operating systems.
• When launching its own investigation, the CMA noted that the Activision Blizzard acquisition could lessen competition, including in the subscription and cloud gaming space.
• All three regulators are also concerned that Microsoft could make Call of Duty and other games exclusive to its ecosystem, preventing rivals like Sony and Nintendo from accessing this content.
• Microsoft, however, repeatedly pledged to keep CoD on PlayStation “as long as there’s a PlayStation out there to ship to.” The company also entered into a 10-year commitment to bring the franchise to Nintendo.
• Microsoft’s acquisition of Activision Blizzard was initially expected to close by Spring 2023. However, if the deal is blocked by antitrust regulators, the company will have to pay $3 billion to Activision Blizzard.