CMA list possible remedies for Microsoft-Activision merger approval

UK regulators at the Competition and Markets Authority outline some possible remedies and concessions they may require for the Microsoft-Activision merger.

CMA list possible remedies for Microsoft-Activision merger approval
3 minutes & 17 seconds read time

Regulators at the Competitions and Markets Authority (CMA) have published a list of possible remedies that may be required in order to get the Microsoft-Activision merger passed in the United Kingdom.

CMA list possible remedies for Microsoft-Activision merger approval 3

Today the CMA delivered new updates on the Microsoft-Activision merger process with a series of documents, including some remedies and concessions that could get the deal approved. The 12-page document includes 53 paragraphs of thorough information on the current regulations and lays out some very interesting preliminary options.

It's important to note that these possible behavioral and structural remedies are not finalized. This is essentially a first draft made by the CMA based on the provisionary findings of the previously conducted Phase 2 investigation. These proposed remedies were drafted by the CMA's Inquiry Group (Martin Coleman, John Thanassoulis, Humphrey Battcock, Ashleye Gunn) and do not consider the 10-year Call of Duty licensing deal that Microsoft has offered to Sony, Nintendo, and Valve.

Before we proceed, let's go over some background info. The merger process is a confusing one with lots of twists and turns. Regulators like the CMA typically require two types of remedies, or stipulations that companies need to follow in order to get the deal approved.

The first is a Structural Remedy. These remedies include:

  • Divesture - The company is required to sell parts of its business that may trigger anti-competitive market effects
  • Prohibition - Not allowing the deal to go through

The second type is called a Behavioral Remedy. These remedies are more complex and require adjustments from the company on a market behavior level--how the company conducts business in relation to its competitors.

In the context of the Microsoft-Activision merger, these remedies are defined as such: "Behavioral remedies seek to change aspects of business conduct form what might be expected after the merger, based on the parties' incentives and resources, to create a competitive environment similar to that expected in the absence of the merger."

Behavioural remedies are designed to address an SLC and/or its adverse effects by regulating the ongoing conduct of parties following a merger. The CMA will generally only use behavioural remedies as the primary source of remedial action where:

(a) divestiture and/or prohibition is not feasible, or the relevant costs of any feasible structural remedy far exceed the scale of the adverse effects of the SLC;

(b) the SLC is expected to have a short duration; or

(c) behavioural measures will preserve substantial relevant customer benefits (RCBs) that would be largely removed by structural remedies

Right now the CMA does not have specific behavioral remedies outlined, but will consider behavior or structural remedies that satisfy their SLC concerns, or a combination of the two. The CMA is not against a behavioral remedy, but it does say that based on the provisional finding, the conditions in which a behavioral remedy would be the principal remedy do not seem to be present.

The CMA is asking Microsoft and Activision for evidence on whether or not behavioral remedies could be enough to circumvent any lessening of competition presented in the console gaming and cloud streaming markets. Regulators will then consider any evidence presented as they make more progressive determinations on the merger.

The CMA says it is open to considering behavior remedies in the form of an access remedy, which is exactly what Microsoft has offered competitors with its 10-year Call of Duty deal.

Accordingly, while none of the circumstances in which the CMA would select a behavioural remedy as the primary source of remedial action in a merger investigation (as summarised in paragraph 15 above) appear to be present, the CMA will also consider a behavioural access remedy as a possible remedy.

Read Also: CMA gives update on investigation findings

Here's an except from Page 9:

"As noted above, the circumstances in which the CMA might select a behavioral remedy as the primary source of remedial action are not present in this case. The two markets in which the CMA has provisionally found SLCs are multi-faceted and continue to develop. This is particularly the case in cloud gaming, where the customer offerings and business models of market participants are evolving rapidly. We are of the initial view that any behavioral remedy in this case is likely to present material effectiveness risks. We invite the Parties to provide evidence on how these risks could be appropriately managed to ensure that any behavioral remedy is effective."

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Derek joined the TweakTown team in 2015 and has since reviewed and played 1000s of hours of new games. Derek is absorbed with the intersection of technology and gaming, and is always looking forward to new advancements. With over six years in games journalism under his belt, Derek aims to further engage the gaming sector while taking a peek under the tech that powers it. He hopes to one day explore the stars in No Man's Sky with the magic of VR.

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