REG - Competition and Mkts - Merger Update: Microsoft/Activision

Activision BlizzardAnnouncement

22/09/2023 08:15

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RNS Number : 3506N  Competition and Markets Authority  22 September 2023

New Microsoft/Activision deal addresses previous CMA concerns in cloud gaming

The sale of Activision's cloud gaming rights to Ubisoft substantially
addresses previous concerns and opens the door to the deal being cleared, the
CMA said today.

While the CMA has identified limited residual concerns with the new deal,
Microsoft has put forward remedies which the CMA has provisionally concluded
should address these issues.

The CMA is now consulting on the remedies before making a final decision.

The new deal

Earlier this year, the CMA blocked Microsoft from acquiring the whole of
Activision due to concerns that the deal would harm competition in cloud
gaming in the UK. After that deal was blocked, Microsoft submitted a
restructured transaction in August for the CMA to review.

Under that new deal, Microsoft will not purchase the cloud gaming rights held
by Activision, which will instead be sold to an independent third party,
Ubisoft Entertainment SA (Ubisoft), before the deal is completed.

The prior sale of the cloud gaming rights will establish Ubisoft as a key
supplier of content to cloud gaming services, replicating the role that
Activision would have played in the market as an independent player.

In contrast to the original deal, Microsoft will no longer control cloud
gaming rights for Activision's content, so would not be in a position to limit
access to Activision's key content to its own cloud gaming service or to
withhold those games from rivals. Unlike the remedies the CMA previously
rejected, Ubisoft will be free to offer Activision's games both directly to
consumers and to all cloud gaming service providers however it chooses,
including for buy-to-play or multigame subscription services, or any new model
for providing content that might emerge as the market develops. The deal with
Ubisoft also requires Microsoft to port Activision games to operating systems
other than Windows and support game emulators when requested, addressing the
other main shortcoming with the previous remedies package.

Today's decision

The CMA considers that the restructured deal makes important changes that
substantially address the concerns it set out in relation to the original
transaction earlier this year.

In particular, the sale of Activision's cloud streaming rights to Ubisoft will
prevent this important content - including games such as Call of Duty,
Overwatch, and World of Warcraft - from coming under the control of Microsoft
in relation to cloud gaming. The CMA originally found that Microsoft already
has a strong position in cloud gaming services and could have used its control
over Activision content to stifle competition and reinforce this position. The
new deal instead results in the cloud streaming rights for Activision's games
being transferred to an independent player, Ubisoft, maintaining open
competition as the market for cloud gaming develops over the coming years.

While the restructured deal is materially different to the previous
transaction and substantially addresses most concerns, the CMA has limited
residual concerns that certain provisions in the sale of Activision's cloud
streaming rights to Ubisoft could be circumvented, terminated, or not
enforced.

To address these concerns, Microsoft has offered remedies to ensure that the
terms of the sale of Activision's rights to Ubisoft are enforceable by the
CMA. The CMA has provisionally concluded that this additional protection
should resolve those residual concerns.

The CMA has now opened a consultation, until 6 October, on Microsoft's
proposed remedies.

Colin Raftery, senior director of mergers and Phase 1 decision maker, said:

"This is a new and substantially different deal, which keeps the cloud
distribution of these important games in the hands of a strong independent
supplier, Ubisoft, rather than under the control of Microsoft."

"With additional protections to make sure that the deal is properly
implemented, this will maintain the structure of the market, enabling open
competition to continue to shape the development of cloud gaming in the years
to come, and giving UK gamers the opportunity to access Activision's games in
many different ways, including through cloud-based multigame subscription
services."

Sarah Cardell, CEO of the CMA, said:

"The CMA's position has been consistent throughout - this merger could only go
ahead if competition, innovation, and choice in cloud gaming was preserved. In
response to our original prohibition, Microsoft has now substantially
restructured the deal, taking the necessary steps to address our original
concerns.

"It would have been far better, though, if Microsoft had put forward this
restructure during our original investigation. This case illustrates the
costs, uncertainty and delay that parties can incur if a credible and
effective remedy option exists but is not put on the table at the right time."

More information on the restructured transaction, the new Phase 1
investigation and how to submit comments is available on the Microsoft /
Activision Blizzard (ex-cloud streaming rights) merger inquiry
(https://www.gov.uk/cma-cases/microsoft-slash-activision-blizzard-ex-cloud-streaming-rights-merger-inquiry)
.

Notes to Editors

1.   Microsoft is proposing to purchase Activision, excluding cloud gaming
rights for existing and future Activision PC and console games released over
the next 15 years (excluding in the European Economic Area).

2.   Following the prohibition of the original deal, Microsoft also requires
permission from the CMA to buy any part of Activision, so the CMA has also
launched a separate consultation to inform its decision on whether to grant
Microsoft permission to buy Activision. Both consultations will remain open
until Friday, 6 October.

3.   The full timeline of the CMA's investigation into the original
transaction (Phase 1 and 2) is available here: Microsoft / Activision Blizzard
merger inquiry - GOV.UK (www.gov.uk)
(https://www.gov.uk/cma-cases/microsoft-slash-activision-blizzard-merger-inquiry)

4.   All media enquiries should be directed to the CMA press office by email
on press@cma.gov.uk (mailto:press@cma.gov.uk) , or by phone on 020 3738 6460.

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