Analysis: UK's handling of Microsoft deal sows doubts over post-Brexit direction

Activision Blizzard

23/08/2023 07:00

By Paul Sandle and Kate Holton
       LONDON, Aug 23 (Reuters) - The long-running battle
between Microsoft  MSFT.O  and Britain over the Activision
Blizzard  ATVI.O  deal took another twist on Tuesday, raising
more questions than answers about the country's approach to
deals in the post-Brexit era. 
    Britain's Competition and Markets Authority (CMA) has been
locked in a dispute with the U.S. software giant over its $69
billion bid to buy the "Call of Duty" maker since it opposed the
takeover in April. 
    It had said in July, just minutes after the U.S. regulator
failed in its own effort to stop the takeover in court, that it 
was willing to look again at the case when Microsoft returned
with a "detailed and complex" proposal. 
    On Tuesday it said it would stick to its original decision
to block it.
    But it will look at a separate restructured deal put forward
by Microsoft, in which Activision would divest its cloud
streaming rights to a third party - France's Ubisoft
Entertainment  UBIP.PA  - excluding in the European Union.
    The carve-out is designed to not upset a deal with Brussels
for Microsoft to license content to rival cloud services. 
    EU antitrust regulators said in response they would now look
at whether the new terms would affect the concessions they had
already agreed with the U.S. company. 
    Ronan Scanlan, a competition lawyer at Arthur Cox in Dublin,
who previously worked for the CMA, said no one was well-served
by the "uncertainty and confusion" in Britain. 
    "Some may say that the CMA has bent over backwards to
accommodate Microsoft, others that this is the consequence of
the CMA having over-reached in the first place," he told
Reuters.
    
    TOUGH STANCE
    The CMA had objected to the world's biggest gaming deal over
concerns it would hinder competition in the nascent cloud gaming
sector, and said that a Microsoft offer to make Activision's
games available on rival leading cloud gaming platforms was not
enough to remedy its concerns.
    The decision underscored the tough new stance the CMA was
taking against big technology after it became a standalone
regulator following Britain's departure from the European Union.
    Gustaf Duhs, a former CMA lawyer and competition lead at
Stevens & Bolton, said the new proposal had moved beyond
behavioural remedies, which the CMA had never liked, to
something closer to a structural remedy.
    "But it's not a clean structural remedy because there's
still fundamentally a link between the activities of Microsoft
and Ubisoft, and it's limited rights that are being
transferred," he said. 
    The CMA could seek assurances on how Ubisoft would be able
to use the rights, which would take the concession back into
behavioural remedy territory, he added.  
    Scanlan said under the newly proposed deal the merged
Microsoft-Activision would offer the gaming content to only one
player, which will be allowed to commercialise the rights to
other cloud gaming service providers.  
    He said the question must be asked if the time it has taken
to get to this point has been well-spent for all parties
involved. "Few, other than perhaps the CMA, would answer in the
affirmative," he said.
    Antony O'Loughlin, head of litigation at law firm Setfords,
agreed. "For Microsoft and other regulators, this likely
represents an unnecessary step the company's been forced to take
by an overzealous UK regulator, which still hasn't green-lighted
the deal," he said.
    The fate of Microsoft's deal in Britain has brought in to
question whether the CMA has the power to kill a megadeal if it
is not in tune with the United States, European Union and China.
    The CMA's block in April drew fury from the merging parties,
with Microsoft saying that Britain was closed for business. 
    It said on Tuesday that it had not felt any political
pressure over its handling of the deal.   
    Tom Smith, a partner at law firm Geradin Partners and
previously legal director at the CMA, said both sides would
portray the outcome as a win, with the CMA securing concessions
that no other agency had achieved.
    The CMA will also avoid having to defend its original block
in court, and Microsoft finally looks set to secure its deal. 
    "The process has been tortuous, and there's still possibly
scope for the wheels to come off, but we shouldn't expect Big
Tech deals to sail through nowadays," Smith said. 
    The CMA will now review the new proposal, with a deadline
for an announcement by Oct. 18. It could order a much longer
inquiry if it finds it still has competition concerns. 
    

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Microsoft, Activision to sell streaming rights to secure biggest
video gaming deal     urn:newsml:reuters.com:*:nL4N3A31FL
ANALYSIS-Microsoft tests the limits of Britain's antitrust
authority     urn:newsml:reuters.com:*:nL8N3933T0
EXPLAINER-What challenges does Microsoft's $69 bln Activision
deal face?     urn:newsml:reuters.com:*:nL1N3521JN
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Reporting by Kate Holton and Paul Sandle in London
Additional reporting by Martin Coulter in London
Editing by Matthew Lewis)
 ((kate.holton@thomsonreuters.com; 0044 207 542 8560; Reuters
Messaging: kate.holton.thomsonreuters.com@reuters.net))