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Microsoft appeals UK's block on Activision deal

CMA: European Commission accepted proposals that would let Redmond set terms in market 'for the next 10 years'

Microsoft has filed an appeal against the UK competition watchdog’s decision to block its takeover of game developer Activision Blizzard, just days after China became the latest country to approve the deal.

The British government’s Competition and Markets Authority (CMA) announced in April it was opposed to Microsoft’s proposed purchase of the gaming giant in order to “protect innovation and choice in cloud gaming". It expressed concerns the move would stifle competition in what is a growing market.

Brad Smith, Microsoft president and vice chair, responded by saying the company was determined to acquire Activision Blizzard and that it intended to appeal against the decision.

A Microsoft spokesperson confirmed to The Register today that it filed an appeal yesterday to the Competition Appeal Tribunal (CAT) which handles such motions against CMA rulings.

Currently, the UK is the only jurisdiction to officially block Microsoft’s assimilation of gaming powerhouse Activision, with China’s approval this week bringing the total number of countries that have given Redmond the go-ahead to 37.

The only other territory where the deal appears not to be simply being waved through is the US, where the Federal Trade Commission (FTC) has not explicitly blocked the deal, but has filed a legal case against the proposed merger on similar grounds to the UK's objections: that it would enable Microsoft to suppress competition for Xbox consoles and cloud-gaming. An evidentiary hearing for this is scheduled for August 2.

The EU gave its approval to Microsoft’s takeover earlier this month, saying “the Commission's in-depth market investigation indicated that Microsoft would not be able to harm rival consoles and rival multi-game subscription services.”

This stands in contrast to the CMA’s view of things, with the competition watchdog saying its final decision to block the deal came only after Microsoft’s proposed solution “failed to effectively address the concerns in the cloud gaming sector,” outlined in the CMA’s provisional findings published in February, following a review that kicked off the previous September.

It noted at the time that Microsoft found itself in a strong position in cloud gaming services and the evidence available indicated Microsoft “would find it commercially beneficial to make Activision’s games exclusive to its own cloud gaming service.”

The decision sparked vitriol from both Microsoft and Activision, with the former claiming it demonstrated “a flawed understanding of this market and the way the relevant cloud technology actually works,” while Activision said that it “contradicts the ambitions of the UK to become an attractive country to build technology businesses,” as we reported at the time.

Open for business - but not that kind...

This led to the chairman of the CMA Marcus Bokkerink taking the step of defending the agency’s decision, telling the UK's Telegraph newspaper he was surprised by the reaction and disagreed with the suggestion that blocking Microsoft’s $69 billion acquisition of Activision meant the UK was “closed for business.”

The CMA also criticized the EU’s decision to allow the merger, saying in a series of tweets the UK, US and European competition authorities were “unanimous that this merger would harm competition in cloud gaming,” and that Microsoft’s proposals, as accepted by the European Commission, “would allow Microsoft to set the terms and conditions for this market for the next 10 years.”

We asked Activision Blizzard whether it had submitted its own separate appeal to the CMA ruling, but it had not responded by the time of publication.

Microsoft must be hoping that its appeal will be successful. It could theoretically go ahead with the deal despite the CMA ban, but Facebook parent Meta has just been forced to sell Giphy to stock photo flinger Shutterstock for a fraction of what it paid for it, after deciding to proceed with the transaction despite the CMA objecting to it.

There is also another challenge to the deal: a lawsuit filed by a group of gamers last year is now back on, after being initially dismissed by the judge because of a lack of supporting evidence. The plaintiffs resubmitted the complaint, and the judge has now allowed it to go forwards.®

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