CMA Reverses Decision and Reopens Investigation into Microsoft-Activision Blizzard Deal
Britain’s competition regulator, the Competition and Markets Authority (CMA), announced on Wednesday that it may reconsider its opposition to the Microsoft-Activision Blizzard deal following a restructuring proposal. This development comes after the CMA blocked the $69 billion gaming deal in April, becoming the first regulatory body to do so. However, a recent U.S. court ruling permitting the deal to proceed has left the UK regulator isolated and prompted a potential change in their stance.
The CMA clarified that while submitting new remedies after a final report is issued is not allowed, the merging parties can restructure the deal, which would initiate a fresh merger investigation. Both Microsoft and Activision Blizzard have expressed their willingness to explore modifications to the transaction, and the CMA has indicated its readiness to engage in discussions at this early stage. The exact timeline for the next steps will be determined in due course.
The CMA’s decision to reconsider the deal at this juncture, particularly with an imminent appeal on the horizon, has surprised industry advisors and competition lawyers alike. Alex Haffner, a competition partner at UK law firm Fladgate, described it as an “unprecedented and dramatic turn of events.” Notably, one anonymous source involved in the deal suggested that the CMA’s decision could be motivated by a desire to avoid standing alone against the European Union and the United States.
Microsoft and Activision Blizzard Face the Challenge of Satisfying Multiple Regulatory Bodies
Microsoft and Activision Blizzard now face the task of navigating a complex path to gain regulatory approval for their deal. They must submit a proposal that satisfies the CMA while remaining aligned with remedies previously accepted by the European Union. The companies had set a deal deadline of July 18, with Microsoft potentially liable for a $3 billion breakup fee if the agreement fell through. With the revived $69 billion deal back on track, the focus now lies on modifying the transaction to secure regulatory clearance.
Jonathan Compton, a partner at law firm DMH Stallard and a specialist in competition law, expressed skepticism about the feasibility of making structural alterations to the deal. He warned that any such modifications could trigger additional inquiries from the U.S. Federal Trade Commission (FTC) and the European Commission. The challenge lies in resetting the clock specifically for the CMA process without affecting other jurisdictions. The CMA has yet to provide further clarification on its U-turn or the new investigation, including whether it will follow its Phase 1 and 2 process, which can take up to a year.
When the CMA’s CEO, Sarah Cardell, announced the decision to block the deal in April, she firmly stated that there was no conceivable way for it to proceed. However, the recent developments have prompted a reconsideration of the regulator’s stance. The CMA’s change of heart has attracted significant attention, and industry participants eagerly await additional information on the new investigation and its implications.
Implications and Uncertainties Surrounding the Microsoft-Activision Blizzard Deal
The potential resolution of the Microsoft-Activision Blizzard deal opens up various implications and uncertainties. If the restructured deal manages to satisfy the CMA and secure regulatory approval, it would mark a significant milestone for the gaming industry, as it would become the largest deal of its kind in history. The outcome will have reverberations throughout the gaming sector, influencing market dynamics and the competitive landscape.
While the CMA’s decision to reopen the investigation has garnered attention, the process ahead remains challenging for both companies. They must strike a delicate balance, ensuring that modifications to the deal appease the CMA without conflicting with remedies accepted by the European Union. This intricate task demands careful consideration to avoid triggering further scrutiny from other regulatory bodies, such as the FTC and the European Commission.
Furthermore, the CMA’s unexpected U-turn raises questions about the regulatory landscape and the consistency of decision-making processes. The lack of clarity surrounding the CMA’s change in position, the new investigation, and the timeline for resolution contributes to the overall uncertainty. Stakeholders eagerly await further details from the CMA to shed light on these matters and gain a better understanding of the potential path forward.
In conclusion, the CMA’s announcement to reconsider its opposition to the Microsoft-Activision Blizzard deal marks a significant development in the gaming industry’s landscape. While the exact modifications to the transaction remain unclear, both companies now have an opportunity to propose a restructured deal that satisfies the CMA’s concerns. The path ahead is complex, with potential implications for other regulatory bodies and the competitive dynamics within the industry. As the companies work towards securing regulatory approval, industry participants and observers eagerly await further updates and clarifications from the CMA.
