New updates from UK regulators show early signs of approval in the $68.7 billion Microsoft-Activision merger.
Weeks ago, Competition and Markets Authority officially denied Microsoft's original Activision merger proposal. Microsoft then submitted a new deal to the CMA that specifically addressed the anti-competitive concerns outlined in the agency's Final Report. The new proposal is in turn part of a new Phase 1 investigation. Microsoft intends to sell the cloud game streaming rights of Activision's games to Ubisoft, which sees Microsoft effectively divesting, or handing off, the commercial rights to stream some of the biggest games on the market.
The CMA has had time to look over Microsoft's new deal and has found it to be acceptable. Regulators have provisionally approved the merger as a result. In an announcement post, the agency says that Microsoft's Proposed Undertakings of the terms outlined in the Ubisoft Divestment Agreement may be accepted and the merger could be cleared. The case is not at that stage yet, however, and no final decision has yet to been made on whether or not the merger will be allowed to close.
To be clear, the CMA has determined that Microsoft's new proposal might be an effective proposed undertaking to solve anti-competitive concerns. The agency only accepts these particular proposals if it reasonably believes such a proposal can address SLCs (Significant Lessening of Competition), and in this case, that would be the cloud game streaming SLCs outlined by the CMA.
The CMA therefore considers that there are reasonable grounds for believing that the Proposed Undertakings offered by the Parties, or a modified version of them, might be accepted by the CMA under section 73(2) of the Act.
The CMA now has until Friday 1 December 2023 pursuant to section 73A(3) of the Act to decide whether to accept the undertakings, with the possibility to extend this timeframe pursuant to section 73A(4) of the Act to Wednesday 31 January 2024 if it considers that there are special reasons for doing so.
If no undertakings are accepted, the CMA will refer the Merger for a phase 2 investigation pursuant to sections 33(1) and 34ZA(2) of the Act.
If the terms are accepted, the CMA can then greenlight the deal and avoid the need to move to a Phase 2 investigation. If a Phase 2 investigation is ordered, then the CMA can take many more months to investigate the deal and Microsoft will have to re-negotiate another merger deadline with Activision.
As it stands right now, the CMA must collect and thoughtfully consider evidence and feedback from third-party participants in the video games industry on the matter. Once the information is gathered, the CMA will give until December 1, 2023 to decide on whether or not the case moves to Phase 2.
The decision could also be delayed as far back as January 31, 2024.
Microsoft's current deal with Activision expires on October 18, 2023.