Everyone is rightly analyzing the fine details of CMA’s rejection of the Microsoft Activision deal. While most of that effort has been focused on what the CMA got wrong, it’s important to check some of the very basic statements that the CMA made, that led them to the conclusion that they made.
On page 293 of their 400 page decision, CMA states bluntly that they just don’t believe Microsoft. Here is the relevant passage:
“In respect of Microsoft’s submission that the agreements prove conclusively that Microsoft is incentivised to distribute Activision content widely, we consider it is relevant that these agreements were entered into in the context of an ongoing merger review process.
We consider that Microsoft entering into these agreements does not provide us with reliable evidence regarding its incentives in the same way as other past behaviour which is separate to the Merger and Merger review process, or our general analysis of the Merged Entity’s incentives above.
Accordingly, we do not consider the fact that Microsoft has entered into these agreements undermines our findings on its post-Merger incentives. Microsoft may have short-term incentives to enter into these agreements to seek to address the competition concerns arising from the Merger, but this is not informative of its longer-term commercial incentives.”
This section of the document is talking about the contracts that Microsoft entered into with the many cloud gaming companies that are their erstwhile competitors. The biggest of them all, Nvidia and their GeForce Now service, recently defended Microsoft’s deal. They also stated that they would have definitely benefited if it will go through. This is important because it directly refutes the CMA’s own claims that the finer details of the contract make it undesirable for Nvidia to enter into.
While Nvidia stating the CMA made wrong assessments of their business is one thing, the CMA just flat out stating they didn’t believe Microsoft is something else. Microsoft, on their end, was not legally required to offer those contracts, and so the move seemed preemptive of what remedies regulators would have asked them to make.
But the CMA’s line of thinking, to put it quite simply, is that they believe Microsoft is just lying. They don’t believe Microsoft is really interested in opening up competition, and that they intend to dominate cloud gaming at a future point when it becomes convenient for them.
This point will ultimately guide Microsoft’s and Activision’s appeal to the Competitions Appeal Tribunal. Microsoft will likely argue that the CMA’s decision is not being made in good faith, particularly for a company that has been doing business in the business region for 20 years. In fact, Microsoft is so trusted that they provide security services for the UK government itself.
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