Microsoft and UK regulators pause Activision merger legal battle

Microsoft and UK regulators at the CMA have paused their appeals battle, CMA is now willing to work with Microsoft to find ways to address concerns.

2 minutes & 32 seconds read time

Following the FTC's big loss in federal court, Microsoft and UK antitrust regulators have paused their ongoing legal battle in appeals court in an effort to find solutions regarding the $68.7 billion Activision merger.

Microsoft and UK regulators pause Activision merger legal battle 32

Two days ago, the FTC lost its federal court case against the Microsoft-Activision merger. While the FTC has appealed the decision, Microsoft and Activision may be able to close the deal as early as this weekend. Since UK regulators at the CMA identified similar anti-competitive concerns as the FTC, the CMA is now under intense pressure by opposing the case.

As it looks like Microsoft could close and integrate with Activision in the coming days, UK regulators have agreed to Microsoft's proposal to issue a stay of litigation, or a pause, for their ongoing appeals court battle. The CMA chose to block the Microsoft-Activision merger in April and the tech firms have chosen to appeal the decision in the Competition Appeals Tribunal. Now that appeal has been put on hold.

A statement from Microsoft President Brad Smith explains the situation:

"After today's court decision in the U.S., our focus now turns back to the UK.

"While we ultimately disagree with the CMA's concerns, we are considering how the transaction might be modified in order to address those concerns in a way that is acceptable to the CMA.

I"n order to prioritize work on these proposals, Microsoft and Activision have agreed with the CM that a stay of the litigation in the UK would be in the public interest and the parties have made a joint submission to the Competition Appeal Tribunal to this effect."

Shortly after Smith's statement was made, sources told CNBC's David Faber that Microsoft had offered the CMA a "small and discreet" divestiture in the hopes of satisfying the UK regulator's concerns.

The CMA had previously said that the Microsoft-Activision merger would result in significant lessening of competition (SLC) in console, cloud and subscription markets. Following the European Commission's approval, the CMA removed the console theory of harm and focused more on cloud and subscriptions. The reported Microsoft offer would then need to address these remaining concerns.

Following those reports, the Competition and Markets Authority gave a statement to The Verge that clarified that Microsoft and Activision could choose to restructure the deal--e.g. make a divestiture--but the CMA may need to conduct an entirely new merger investigation to determine whether or not the SLC effects had been remediated.

Whilst merging parties don't have the opportunity to put forward new remedies once a final report has been issued, they can choose to restructure a deal, which can lead to a new merger investigation. Microsoft and Activision have indicated that they are considering how the transaction might be modified, and the CMA is prepared to engage with them on this basis. These discussions remain at an early stage and the nature and timing of next steps will be determined in due course. While both parties have requested a pause in Microsoft's appeal to allow these discussions to take place, the CMA decision set out in its final report still stands.

Microsoft is expected to close the Activision deal sometime this weekend if the FTC's appeal falls through.

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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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