Monday, September 25, 2023

UK regulators have opened the door to a swift Microsoft-Activision deal -Dlight News

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UK regulators have opened the door to Microsoft and Activision Blizzard closing their $75bn video games deal within six weeks, as the companies scramble to restructure their agreement to satisfy competition concerns.

Meanwhile, the US Federal Trade Commission failed in its last-ditch efforts to prevent the deal from closing in the US late on Friday. His request for a preliminary injunction to block the deal pending a separate action was denied by the Ninth Circuit Court of Appeals, a day after a similar injunction request was denied by a federal court in San Francisco. The move left approval in the UK as the only hurdle left for the companies in their efforts to seal the deal.

The UK’s Competition and Markets Authority said on Friday it would push back the July 18 deadline to block the deal until August 29, after receiving “detailed and complex submissions from Microsoft”. The company argued that the agency should reexamine its conclusions “in light of material changes in circumstances and special reasons.”

That timetable could allow Microsoft to complete the merger faster than suggested by the CMA earlier this week, when the agency said the restructuring deal would trigger a new investigation, likely to take several months.

The CMA’s move to reopen debate about its final decision, which is unusual for this late in the regulatory process, revives the prospect for Microsoft to address the watchdog’s concerns about competition in the cloud gaming market. The CMA did not provide details of Microsoft’s submission, which was made more than a month ago.

The extension comes as Microsoft looks for ways to restructure its cloud gaming business in the UK to appease the CMA, which ruled in April that the maker of the Xbox console could merge with the maker of hit games. Call of Duty And Diablo would give it “the ability to undermine new and innovative competitors”.

The UK competition regulator’s objection is seen as the last major legal hurdle facing the world’s biggest video games deal, with US courts earlier this week siding with Microsoft to reject an initial attempt by the Federal Trade Commission to block the merger.

The merger agreement between Microsoft and Activision Blizzard is set to expire on July 18, allowing either company to walk away from the deal and trigger a $3bn break fee. However, after a legal victory this week in US courts and a potential lifeline in the UK, people close to the companies say they are likely to agree to extend the deal as early as next week.

“Things are moving very quickly,” said one person close to the negotiations.

One potential concession to the CMA being considered by Microsoft is a move to sell the cloud streaming rights to its catalog of games to another provider in the UK, according to people familiar with the discussions. The arrangement could see Microsoft exit the cloud gaming market in the UK or hand over the operation of the games streaming platform for its Xbox console to a third party.

Microsoft has sounded out potential investors and operators about such a deal, which could calm the CMA’s concerns that the Xbox maker would have too much control over the nascent market for cloud gaming.

Bloomberg previously reported details of the cloud discussions. Microsoft and Activision Blizzard declined to comment.

Anders Analysis analyst Gareth Sutcliffe said such a deal would be “really awkward” for consumers but “may be a way around the CMA”. “Microsoft will run numbers for UK carve-outs that will please the CMA,” he said. “They will at least look at the worst options.”

Additional reporting by Kate Baioli in London and Richard Waters in San Francisco

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