The long-running battle between Microsoft and Britain over the Activision Blizzard deal took a new turn on Tuesday, raising more questions than answers about the country’s handling of deals in the post-Brexit era.
Britain’s Competition and Markets Authority (CMA) has been locked in a dispute with the US software giant over its $69 billion bid for the “Call of Duty” maker since it opposed the takeover in April.
And in July, just minutes after the US regulator failed in its bid to block the takeover in court, the Capital Markets Authority said it was ready to re-examine the case if Microsoft returned with a “detailed and complex” proposal.
On Tuesday, it said it would stick to its original decision to block the takeover.
But it will consider a separate restructuring deal proposed by Microsoft that would have Activision selling its cloud streaming rights to a third party – France’s Ubisoft Entertainment – exclusively in the European Union.
The cut is intended not to prejudice the deal with Brussels under which Microsoft licenses content to competing cloud services.
In response, EU antitrust regulators said they would now review whether the new terms would affect concessions they had already agreed with the US company.
Ronan Scanlan, a competition barrister at Arthur Cox in Dublin who previously worked for the CMA, said Britain’s “uncertainty and confusion” served no one.
“Some may say that the Capital Markets Authority has made great efforts to absorb Microsoft, and others say that this is because the Capital Markets Authority went too far in the first place,” he told Reuters.
A capital markets regulator has vetoed the world’s largest gaming deal over concerns it will stifle competition in the emerging cloud gaming sector, saying Microsoft’s offer to make Activision games available on competing leading cloud gaming platforms was not enough to hold them to remove objections.
The decision underlined the strict new stance taken by the Capital Markets Authority towards major technology companies after it became an independent regulator after Britain left the European Union.
Gustav Dohs, a former CMA lawyer and competition leader at Stevens & Bolton, said the new proposal bypassed behavioral corrective measures, which the CMA never liked, and was now closer to a structural measure.
“But it is not a purely structural solution because there is still a basic link between the Microsoft and Ubisoft businesses, and the limited rights are transferred,” he added.
He added that the CMA may demand guarantees on how Ubisoft uses the rights, turning the franchise back toward behavioral therapy.
Under the newly proposed agreement, Scanlan said, the combined Microsoft-Activision company will only offer game content to one player, who will be allowed to sell the rights to other cloud game service providers.
He said the question should be asked whether the time it had taken to get to this point was well spent for all parties involved. “Few, except perhaps the Capital Markets Authority, will answer in the affirmative,” he said.
Anthony O’Loughlin, chief prosecutor at law firm Sitford, agrees. “For Microsoft and other regulators, this is probably an unnecessary step that the company has been forced to take by an overzealous British regulator, which has not yet given the green light to the deal,” he said.
The fate of the Microsoft deal in Britain has raised the question of whether the Capital Markets Authority has the power to cancel a huge deal if it conflicts with the United States, the European Union and China.
The blockade imposed by the Capital Markets Authority in April angered the merged parties, with Microsoft saying Britain was closed to business.
Microsoft said on Tuesday that it felt no political pressure on how to handle the deal.
Tom Smith, partner at law firm Geradin Partners and former legal director at the CMA, said both sides would portray the outcome as a victory because the CMA made concessions no other agency had.
The CMA will also avoid having to defend its original blockade in court, and Microsoft appears to have finally secured its deal.
“It’s been an arduous process and there may still be room to go, but we shouldn’t expect major tech deals to continue through these days,” Smith said.
The Capital Markets Authority will now review the new proposal, with a deadline for announcing it on October 18th. It can order a much longer investigation if it still has competition concerns.
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