CMA’s Limited Residual Concerns
The Competition and Markets Authority (CMA) has given a provisional nod to Microsoft’s revised deal with Activision after identifying and addressing limited residual concerns. Microsoft’s proactive approach in presenting remedies to these concerns has earned its provisional approval, with the CMA now opening the door for public consultation before making a final decision.
The New Deal
Earlier this year, the CMA had blocked Microsoft’s attempt to acquire the entirety of Activision due to apprehensions over potential competition drawbacks in the UK’s cloud gaming sector. Subsequently, in August, Microsoft submitted a restructured proposal for CMA’s review.
Under this new arrangement, Microsoft will not acquire Activision’s cloud gaming rights; instead, these rights will be divested to an independent third party, Ubisoft Entertainment SA. This strategic move establishes Ubisoft as a pivotal content supplier for cloud gaming services, mirroring the role Activision would have assumed as an independent entity.
In stark contrast to the initial deal, Microsoft will no longer wield control over Activision’s cloud gaming rights, preventing any limitations on access to Activision’s key content through its own gaming services or withholding games from competitors. In a major departure from previous remedies, Ubisoft will have the freedom to offer Activision’s games directly to consumers and all cloud gaming providers in various models, including buy-to-play or multi-game subscriptions. Furthermore, Microsoft will be required to port Activision games to non-Windows operating systems and support game emulators upon request, addressing one of the main shortcomings of previous remedy packages.
Today’s Decision on the Microsoft Activision Deal
The CMA acknowledges that this restructured deal substantially alleviates concerns raised during the original transaction earlier this year. Notably, the sale of Activision’s cloud streaming rights to Ubisoft prevents critical content, such as Call of Duty, Overwatch, and World of Warcraft, from falling under Microsoft’s control in the realm of cloud gaming.
Previously, the CMA was concerned that Microsoft’s dominant position in cloud gaming services could have led to anticompetitive practices. However, the revised deal ensures that the cloud streaming rights for Activision’s games will be held by an independent entity, Ubisoft, maintaining an environment of open competition as the cloud gaming market evolves.
Despite these significant improvements, the CMA still harbors limited concerns about certain provisions related to the sale of Activision’s cloud streaming rights to Ubisoft. To address these concerns, Microsoft has proposed remedies to ensure CMA-enforceable terms, a move that the CMA provisionally believes will resolve these lingering issues.
The CMA has now initiated a consultation period, running until October 6th, for stakeholders to provide feedback on Microsoft’s proposed remedies.
Statements from Key Figures
Colin Raftery, senior director of mergers and Phase 1 decision maker at the CMA, commented on the development, saying,
“This is a new and substantially different deal, which keeps the cloud distribution of these important games in the hands of a strong independent supplier, Ubisoft, rather than under the control of Microsoft.”
“With additional protections to ensure that the deal is properly implemented, this will maintain the structure of the market, enabling open competition to continue to shape the development of cloud gaming in the years to come, and giving UK gamers the opportunity to access Activision’s games in many different ways, including through cloud-based multigame subscription services.”
Sarah Cardell, CEO of the CMA, added,
“The CMA’s position has been consistent throughout – this merger could only go ahead if competition, innovation, and choice in cloud gaming was preserved. In response to our original prohibition, Microsoft has now substantially restructured the deal, taking the necessary steps to address our original concerns.”
“It would have been far better, though, if Microsoft had put forward this restructure during our original investigation. This case illustrates the costs, uncertainty, and delay that parties can incur if a credible and effective remedy option exists but is not put on the table at the right time.”
Microsoft’s proposal involves purchasing Activision, excluding cloud gaming rights for existing and future Activision PC and console games over the next 15 years. Given the initial prohibition, Microsoft also requires CMA’s permission to acquire any part of Activision.
Consequently, the CMA has launched a separate consultation to inform its decision on whether to grant Microsoft permission to buy Activision. Both consultation periods will remain open until Friday, October 6th.