The CMA has shared a new document explaining their logic behind their review of the Microsoft Activision deal.
As you may remember, the CMA and the Microsoft made a request to the Competition Appeal Tribunal to stop the appeals process on the CMA’s original decision, to block the merger.
Microsoft had already explained they were confident that they would win in appeals court. Their decision to not go through with it is to smooth things over with the CMA. We understand Microsoft’s choices and why they decided to go this route, but we hadn’t heard CMA’s side of it, until now.
As explained by Florian Mueller on Twitter (edited for clarity):
“The @CATribunal (Competitions Appeal Tribunal just released a public redacted version of testimony by the @CMAgovUK’s (Competition and Markets Authority) Interim General Counsel regarding the joint motion to stay the UK appeal.
It confirms what was in a recent media report: the CMA’s goal is to publish new provisional views this week. Thereafter, there’ll be another 7-day comment period.
Under oath, the official confirms that the FTC’s failure in court was not key to the request for a stay.
That said, important developments from the U.S. court proceedings may be taken into consideration now. That was the 3rd part of Microsoft’s most recent submission.”
The CMA’s Interim General Counsel is Chris Prevett, and he is the author of this testimony. We’ll also quote from the document to explain what the CMA’s position is.
Microsoft argued that there was a “material change of circumstance or special reason” on July 26, 2023. That was the date when the FTC lost their federal case to block the deal. Now, as Florian explained above, that wasn’t the reason the CMA agreed to review the deal. But, two other things happened after that date that did compel them to change their mind.
On page 5 of the document, Chris writes:
“…Microsoft relies on the fact that, on 15 May 2023, the European Commission issued a decision approving the Merger that had been notified to the Commission on the condition that Microsoft complies with legally-binding commitments offered to the Commission on 20 April 2023.”
The EU decision to approve the deal was a good enough reason to make the CMA reconsider. While we can see how logically, the CMA would have to review a point on which their fellow regulator had disagreement with, there was something else to it as well.
The ‘legally binding commitments’ Chris alludes to here are the ten year contracts Microsoft signed with Nvidia, Boosteroid, and Ubitus. As we explained recently, these three and Microsoft comprise 70 % of the European cloud gaming market. Those conditions led the EU to conclude that the deal would now be good for everyone in the cloud gaming market under their jurisdiction.
And then, on page 6, he writes:
“as discussed at the CMC on 17 July 2023, on 16 July 2023, various media outlets reported that Sony had signed an agreement with Microsoft providing access to Call of Duty following the Merger (the “Sony Agreement”).”
Chris further explains that the CMA has not received a copy of this agreement between Sony and Microsoft. But, Chris, and apparently the rest of the CMA, have read a document that outlines the terms of the agreement.
Based on the text of the document itself, the CMA could share a new provisional opinion as early as last August 7, 2023. That means that opinion could be coming anytime this week or next week. The final decision has a statutory deadline of August 29, 2023.
The way the CMA has laid out their arguments, they still put a premium on their own decisionmaking. They don’t want to seem that they were pressured to change track because of the FTC’s loss. One can speculate they don’t want to show weakness in face of a possible loss at Microsoft’s appeal.
The broader point is, what can change their mind is the real world changes effected by the FTC’s loss, as well as the EU diverging opinion from them. These things are important to Microsoft for the future, and also Sony, maybe even Nintendo, Valve, and others. That’s because Microsoft may have drawn out the terms that the CMA will accept future mergers of this scale.