Wed, May 17, 2023 page10

• EU gives hope to Microsoft in deal to buy Activision

  TOUGH ROAD: Microsoft sought to persuade EU and UK authorities to win over the FTC, but without the UK’s approval that strategy has become more difficult

  • Bloomberg
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  Microsoft Corp’s US$69 billion takeover bid for games developer Activision Blizzard Inc came back from the brink after the EU gave its blessing for one of the biggest deals in history.

  In a decision diametrically opposed to findings by British and US antitrust authorities, EU regulators on Monday said that the transaction could actually boost competition and make the fledgling cloud-gaming market better.

  While EU Commissioner for Competition Margrethe Vestager’s team has raised hopes in Redmond, Washington, and Santa Monica, California — where Microsoft and Activision have their respective headquarters — the duo still face a formidable task convincing UK and US judges to side with them in legal challenges.

  

  A person holds a cellphone displaying the Web site for Activision Blizzard Inc’s Call of Duty in New York on Monday.

  Photo: Bloomberg

  The hardest fight could be in Britain, where the firms must receive a positive ruling from the specialized Competition Appeal Tribunal (CAT), a court with a narrow remit and a history of siding with the officials who pen the initial decisions.

  Microsoft is expected to formally file its appeal with the tribunal by the end of the month.

  “I struggle to see what can be done,” said Pablo Ibanez Colomo, a law professor specialized in competition at the London School of Economics and Political Science. “The standard of review in merger cases in the UK is deferential,” meaning that “the grounds on which the decision can be annulled are quite limited.”

  If deference is a factor, then the CAT would be mindful of comments from British Competition and Markets Authority (CMA) chief executive Sarah Cardell, who responded to the EU’s announcement in an unusually blunt fashion, highlighting how commitments accepted by Brussels would allow “Microsoft to set the terms and conditions for this market for the next 10 years.”

  “They would replace a free, open and competitive market with one subject to ongoing regulation of the games Microsoft sells, the platforms to which it sells them, and the conditions of sale,” Cardell said.

  Earlier on Monday, Vestager dubbed the deal a “pro-competitive” merger that would help to “kick-start” the cloud streaming market.

  She said the EU saw merits in Microsoft’s remedies offering, with her team noting how 10-year licensing deals for rival platforms represented a “significant improvement for cloud-game streaming compared to the current situation.”

  Microsoft president Brad Smith praised the EU decision as empowering “millions of consumers worldwide to play these games on any device they choose.”

  Activision CEO Bobby Kotick said the EU conducted a “thorough, deliberate process to gain a comprehensive understanding of gaming.”

  Microsoft’s and Activision’s lawyers would use it “to provide greater ballast to their appeal of the CMA’s decision which is in the works,” said Alex Haffner, competition partner at London law firm Fladgate LLP.

  When the US Federal Trade Commission (FTC) sued to block the merger in December last year, Microsoft maintained it still had avenues for approval. The Xbox maker’s plan was to persuade UK and EU authorities to accept a global behavioral remedy, then return to negotiations with the FTC. If the US regulator refused to budge, the company wagered it could persuade a US judge that those binding global remedies resolved the competition concerns.

  That strategy has suddenly become much more challenging. As it stands, the FTC trial is not set to begin until early August and is not likely to produce a decision until the end of the year.
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