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Microsoft explains argument against CMA's blocking of Activision Blizzard acquisition

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Last month, the United Kingdom's Competition and Markets Authority announced its decision to block Microsoft's purchase of Activision Blizzard. While they did not feel that the merger would give Microsoft an uncompetitive advantage in the console market, the cloud gaming market was another story. The CMA decided that Microsoft's ability to add Activision Blizzard's titles to Game Pass "would not outweigh the overall harm to competition (and, ultimately, UK gamers) arising from this merger," and decided to block the merger.

Microsoft's appeal on the decision is based on five key arguments, beginning with the assertion that the CMA "made fundamental errors in its assessment of [Microsoft's] current position in cloud gaming services by failing to take account of constraints from native gaming." They go on to claim that they did not properly consider three long-term agreements Microsoft entered into cloud-gaming service providers to license Microsoft and Activision Blizzard games. Additionally, they reject the CMA's conclusion that Activision would have likely made its games available on streaming services without the merger as "irrational and arrived at in a procedurally unfair manner."

The fourth key argument is that the CMA's conclusion that Microsoft would have the "ability and incentive" to "foreclose rival gaming cloud services by withholding access to Activision's gaming content post-Merger" was deeply flawed. They contend the CMA failed to take into account the factors explained in their first two arguments, that there would be no financial advantage to withhold Activision Blizzard games from rival services, and that the CMA wrongly concluded that because AAA games are essential to a streaming service's success, Activision Blizzard's games, in particular, were essential to a streaming service's success. Microsoft claims that the CMA's failure to consider these factors, separately or cumulatively, renders their decision "unlawful, irrational, and/or disproportionate."

Finally, Microsoft argues that the CMA "erred in law by proceeding on the basis that it had a duty to impose what it described as a comprehensive remedy", "unlawfully failed to take account of the interests of comity", "erred in rejecting the Microsoft Cloud Remedy, and "acted in breach of [Microsoft's] common law duty of fairness and the CMA's own remedies guidance."

The Activision Blizzard merger has been a lengthy, difficult process for Microsoft, mostly regarding the cloud gaming market. The European Commission had similar concerns regarding cloud gaming, but approved the merger after Microsoft agreed to license Activision Blizzard titles to other cloud-based gaming services.

This appeals process is likely to take some time as well, as the Competition Appeals Tribunal says they aim to handle "straightforward" cases in less than nine months, but often take longer due to the complicated issues involved. Even if the decision is reversed, they still need to go through the CMA again to be approved. They are also awaiting decisions from trade commissions in South Korea, New Zealand, and Australia, and are dealing with the United States' Federal Trade Commission's lawsuit to block the merger.


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