Microsoft and the UK’s antitrust regulator, the Competition and Markets Authority (CMA), have been granted a conditional two-month pause in their legal battle regarding Microsoft’s proposed $68.7 billion acquisition of Activision Blizzard. The pause aims to provide an opportunity for Microsoft to address the CMA’s concerns. Judge Marcus Smith of the Competition Appeal Tribunal (CAT), responsible for hearing appeals on the CMA’s decisions, has requested the CMA to justify its application for adjournment by providing evidence of a material change in circumstances or “special reasons” for delaying the litigation.
Judge Smith has also requested the CMA to provide details of any new consultation process it plans to undertake. The CAT has temporarily paused the legal battle while awaiting the CMA’s submission of evidence. Microsoft had appealed the CMA’s decision in April to block the merger, citing concerns related to cloud gaming. The CAT was initially scheduled to hear the case starting on July 28th. However, following the US Federal Trade Commission’s failed attempt to halt the acquisition, the CMA expressed willingness to consider a modified merger agreement from Microsoft. All parties involved requested more time, which the tribunal has granted.
During the hearing, a CMA lawyer stated that the FTC’s court loss did not influence the CMA’s decision to review Microsoft’s new proposal. The lawyer expressed confidence that Microsoft’s restructured transaction could address the concerns identified by the CMA. Notably, Microsoft has not yet submitted an amended proposal to the CMA, despite the merger deadline approaching on July 18th. The resolution of the matter by that date appears unlikely. In such a case, Microsoft and Activision may need to agree to an extension of their current agreement or renegotiate terms. Alternatively, if no agreement is reached, Activision can walk away from the deal with a breakup payment of $3 billion from Microsoft.
There have been reports suggesting that Microsoft may sell some cloud gaming rights in the UK to address the CMA’s concerns. Microsoft has already secured deals with third-party cloud gaming companies to offer its games on their platforms, which played a role in the European Union’s approval of the merger.
Meanwhile, the FTC is scheduled to conduct its own evidentiary hearing on the acquisition starting on August 2nd. The agency had filed a lawsuit to block the merger and sought a preliminary injunction, but its attempts were unsuccessful. Both Microsoft and Activision are expected to finalize the merger by early August. While there were previous suggestions that they might try to proceed with the deal by the original deadline despite the CMA dispute, it appears unlikely given the parties’ willingness to find a mutually agreeable resolution. The CMA has extended the deadline to August 29th to make its final decision on the case.
