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EU still set to OK Microsoft's Activision slurp, UK disagrees

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The European Union and the United Kingdom are at odds again, this time over whether to approve the proposed $68.7 billion merger of Microsoft and Activision Blizzard.

The EU has been expected to approve the Windows giant's takeover of the video games house for some time, with some sources saying in March that the bloc would be issuing its formal approval by April 25. That date, of course, has come and gone, with whisperings on Wednesday that Europe was still set to approve the move, likely by May 15. 

Microsoft leadership spent the early days of 2023 in a barnstorming tour of Europe to win approval from regulators, scoring deals with several cloud streaming and video gaming rivals to appease the EU over antitrust concerns. Microsoft owns the Xbox console line, built up its Azure cloud empire, absorbed various games studios, and now wants to hoover up Activision Blizzard; that kind of monopolistic consolidation of hardware, delivery platform, and content puts the fear into Europeans.

Redmond's trip ended with deals between Microsoft and Nvidia, Nintendo, and a pair of cloud streaming services, ostensibly to keep some degree of competition and consumer choice alive, with Sony the primary holdout to the IT giant's romancing.

The EU has given itself a May 22 deadline to issue its decision, and regulators in Ukraine, South Africa, Japan, Chile, Brazil, Saudi Arabia, and Serbia have approved the deal. 

Meanwhile, on the isles

The UK's Competition and Markets Authority has taken a different view.

It blocked Microsoft's Acti-Bliz acquisition proposal in late April on grounds it would give the combined might of the two titans outsized influence on the gaming industry, and the growing cloud gaming market in particular. It's feared Microsoft will crush any upcoming rivals in the cloud-streaming world from its entrenched position in the market.

The CMA also disliked Microsoft's proposed remedies to its objections, saying that its suggestions "were not effective to remedy our concerns and would have replaced competition with ineffective regulation in a new and dynamic market." Blocking the merger, the CMA said, was the only effective and proportionate remedy.

On Thursday, the CMA issued an interim order [PDF] spelling out its requirements for Microsoft or Activision Blizzard before its final decision on the matter, namely neither party acquiring any stake in the other, or any of their subsidiaries, without prior written consent. 

Several video gaming industry analysts have said they believe Microsoft has options available to it to get the deal closed in the UK, though appeals could take months, Wedbush analyst Michael Pachter reportedly said. Pachter believes Microsoft will need to make a carve out to keep Activision content off of its Game Pass streaming service in the UK while complying with requests to make Activision titles accessible on consoles. 

In a US Securities and Exchange Commission filing from Activision regarding the proposed merger, the gaming biz said that an injunction from "a court of competent jurisdiction or other legal or regulatory restraint" could be a reason to terminate the deal, so if it can't get around that UK-shaped hurdle the takeover could be off entirely.

If what it's worth, Activision or Microsoft could be on the hook for between $2 and $3 billion (£1.5 to £2.3b) in termination fees payable to the other should one of them be found to have "breached or failed to perform … such that the related closing condition would not be satisfied," per the filing.

The US Federal Trade Commission has also objected to the merger on anticompetition grounds, with the case scheduled for its first court date this August. ®

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