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UK CMA blocks Microsoft-Activision but opens new investigation of restructured deal

UK antitrust regulator confirms April decision to block $68.7BN Microsoft-Activision gaming mega-merger, rejecting Microsoft’s arguments that it should overturn its original prohibition due to developments. Microsoft’s restructured proposal was recently reviewed by the Competition and Markets Authority (CMA), which announced a new investigation today.

The tech giant would not acquire cloud streaming rights to all Activision games released in the next 15 years (excluding in the EEA) under the restructured proposal. Instead, Microsoft will sell cloud streaming rights to Ubisoft before acquiring Activision.

Sarah Cardell, CMA chief executive, said the revised proposal was “substantially different” from the deal the regulator rejected:

Microsoft has notified a new and restructured deal, which is substantially different from what was put on the table previously. As part of this new deal, Activision’s cloud streaming rights outside of the EEA will be sold to a rival, Ubisoft, who will be able to license out Activision’s content to any cloud gaming provider. This will allow gamers to access Activision’s games in different ways, including through cloud-based multigame subscription services. We will now consider this deal under a new Phase 1 investigation.

This is not a green light. We will carefully and objectively assess the details of the restructured deal and its impact on competition, including in light of third-party comments. Our goal has not changed — any future decision on this new deal will ensure that the growing cloud gaming market continues to benefit from open and effective competition driving innovation and choice.

She told BBC Radio 4’s Today program this morning: “We’ve announced two important developments today: The first is that we have finalized the legal order banning the Microsoft-Activision deal. Deal cannot proceed.

“What Microsoft announced separately today is a new restructured deal that appears to be substantially different from the previous deal. Importantly, it excludes cloud streaming rights for all Activision games for 15 years. Instead, Activision will sell those rights to independent gaming company Ubisoft.”

The CMA believes the revised proposal will allow games to access Activision games through cloud-based multigame subscription services, buy-to-play, or other business models.

It also notes that the restructured proposal would allow Ubisoft to require Microsoft to adapt Activision’s titles to run on non-Windows OSes (for a fee), which could make them available on cloud gaming services like Linux.

The regulator will spend weeks evaluating Phase 1 data to form a conclusion. Although CMA mood music today is upbeat.

“It’s a substantial portfolio of new and future games,” Cardell said of the restructured proposal. “Our concern, as you might remember, was that the original deal would restrict competition in this really important developing new market for cloud gaming.

“We worried Microsoft would control market development too much. Microsoft announced today that the deal will not give them control over those rights. Instead, those rights allow Ubisoft to enter into licensing deals with a variety of cloud gaming providers supporting different business models, such as subscription services or cloud gaming over non-Windows operating systems, which was another of our previous concerns.

This is just the start of a new investigation. We haven’t reached a final view,” she told the BBC. “We will carefully scrutinize this new deal and seek input from third parties from companies with an interest in it before we make a decision.

As we’ve said throughout this process, it’s crucial that this new cloud gaming market remains open for effective competition so gamers can benefit from innovation and choice. It remains our priority as we begin this new investigation.”

The proposal would require Ubisoft to pay Microsoft a one-time fee and use a market-based wholesale pricing mechanism, including usage-based pricing, for Activision’s cloud streaming rights, per the CMA.

After the EU approved the mega-merger in May and US courts rejected the FTC’s lawsuit to stop it last month, the UK competition authority was alone in trying to block the deal.

The CMA suggested last month that a restructured deal could help Microsoft and Activision resolve the impasse, prompting a new merger investigation.

Microsoft and Activision have given themselves until October 18 to complete the acquisition, so a new review is underway.

The CMA’s divested cloud streaming rights proposal excludes the EEA, likely due to the EU’s May approval of the mega-merger. Microsoft promised EEA consumers that they could stream all Activision games on any cloud-based game streaming service for 10 years in exchange for EU approval.


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