UK competition watchdog reopens Microsoft-Activision deal to scrutiny

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The UK competition watchdog has reopened its consultation on Microsoft’s proposed $75bn acquisition of Activision Blizzard, in an unusual move that could lead to a reversal of its decision to stop the blockbuster deal.

New documents submitted by Microsoft to the Competition and Markets Authority on July 25 and published on Monday argue that the deal warrants fresh consideration.

The US tech giant has asked the CMA to consider recent agreements it reached with the European Commission about the takeover, a new 10-year licensing arrangement with rival Sony for Activision’s hit Call of Duty game, as well as additional evidence that led a US judge to overturn the Federal Trade Commission’s effort to block the deal.

The CMA is now inviting responses from individuals and companies on Microsoft’s submission. The deadline for comments is Friday.

“Submissions of this nature are possible but are very rare,” the regulator said. “We will consider Microsoft’s submissions carefully, along with other responses from interested parties”. Microsoft declined to comment.

If the CMA reverses its position on the merger, it would be the first time since Brexit this has happened. That would allow one of the biggest tech acquisitions to close and reshape the global gaming market.

The CMA ruled in April that the deal was anti-competitive over concerns it would prevent competition in cloud gaming, a still nascent part of the industry.

Following the ruling, both companies criticised the UK for hampering tech innovation, with Activision accusing Britain of being “closed for business”.

In its latest submission, Microsoft argued that licensing deals with cloud gaming services, including Nvidia, Boosteroid, Ubitus and Cloudware, should now be taken into consideration.

The first three of these agreements were previously offered as potential remedies to the CMA’s concerns, but the UK regulator argued there was no guarantee Microsoft would not break, terminate or renegotiate the agreements.

However, the EU’s competition regulator approved the Activision deal in May, with the cloud gaming agreements accepted as remedies, as well as a binding 10-year obligation that the company would honour the licenses and not amend the terms without the consent of the European Commission.

Microsoft argued to the CMA that the additional measures have materially changed the circumstances behind the deal.

The company also pointed to its new licensing agreement with Sony in July, which ensures the Japanese tech group’s PlayStation console will retain access to Activision’s Call of Duty titles for the next decade.

“The Sony Agreement ensures that perhaps the most powerful player in the video games industry will have access in the long term to the Activision game it considers most important,” reads Microsoft’s document to the CMA.

Earlier in July, a US federal judge rejected the FTC’s attempts to halt the deal.

Microsoft also argued in its latest submission to the CMA that additional information from the FTC hearing and disclosures from its appeal to the UK Competition Appeal Tribunal amounted to material changes.

Microsoft said it is also in the “advanced stages of putting forward a proposal to modify” the merger and has previously said it is considering a restructure of the deal with Activision. If the transaction is modified, that could trigger a new antitrust probe by the CMA.

The deadline for the CMA’s final ruling on whether to block the deal is August 29.

Additional reporting by Javier Espinoza in Brussels and Kate Beioley in London.