Britain’s competition watchdog faces a tough call on whether to wave through Microsoft and Activision Blizzard’s merger as the EU and the US have done, but a green light could be down the road, experts have suggested.
Microsoft’s renewed $69bn acquisition offer for gaming giant Activision Blizzard has triggered a new probe by the Competition and Markets Authority (CMA) after the initial deal was blocked due to cloud gaming concerns.
The CMA is now reviewing Microsoft’s revised proposal, which involves relinquishing cloud rights for existing and upcoming Activision games over the next 15 years.
French gaming rival Ubisoft is set to acquire cloud streaming rights for regions beyond the European Economic Area (EEA).
Gustaf Duhs, former CMA lawyer and now competition and regulatory lead at Stevens & Bolton, told City A.M. that this new deal will present a challenge for Britain’s competition watchdog.
“This is not a straightforward issue”, he said, “because Microsoft is still in charge of the underlying product.”
Although the restructuring appears to diminish Microsoft’s potential to use certain games as leverage in the cloud gaming market, the changes mainly take effect outside of the EEA and, ultimately, the tech giant still owns the rights to these games.
The question is really the extent to which the new deal dilutes Microsoft’s ability to rely on blockbuster games such as Call of Duty, said Duhs.
“However, it is unlikely Microsoft would have gone to the trouble of restructuring the deal if they didn’t think the CMA would approve it,” he added.
The CMA has until 18 October to come to a Phase 1 conclusion on whether the new deal may harm competition.
Alex Haffner, competition partner at UK law firm Fladgate, agreed with Duhs. He said Microsoft must have a “high degree of confidence it will now in due course (finally) get a regulatory green light from the CMA.”
However, another lengthy regulatory process could still be in store.
If the regulator does not approve the new deal, “one assumes that its decision will be appealed to the Competition Appeal Tribunal and the saga will continue,” said Wessen Jazrawi, member of the London Solicitors Litigation Association.
However, the CMA’s comments “thus far sound positive,” Jazrawi said.
Ben Barringer, equity research analyst at Quilter Cheviot, also believes the new deal “should satisfy the CMA”, although the dotted line is still awaiting a signature.
In terms of Ubisoft’s position, Barringer said this deal effectively makes Ubisoft the “Switzerland of cloud gaming”, as it becomes the “middleman” and provides the market with a healthy dose of neutrality.
Ubisoft shares shot up nine per cent on Tuesday.