While Microsoft filed its formal appeal of the CMAs decision to block its acquisition of Activision Blizzard last week, a report from MLex, a lawyers’ news source, posits the idea that the company is actively working on an end-around to both the initial decision as well as the subsequent interim ultimatum the regulatory body dished out.

For now, Microsoft is publicly pursing the appeals process and has not stated any different, “Our priority is pursuing the appeal process in the UK, and we remain committed to constructive dialogue and solutions to address regulatory concerns,” according to a company spokesperson.

However, MLex understands that Microsoft has retained additional lawyers to examine possible ways for the company to close the deal in the face of an official veto from the CMA.

Some alternative paths for the closing Microsoft’s acquisition bid in spite of the CMA’s current decision is to have Activision leave the UK for “another European country”, and remove itself from CMA jurisdiction. Another option being bandied about by lawyers is Microsoft extending the same licensing concessions it gave the European Commission unilaterally across the UK.

Microsoft is also looking into the legality of the CMA to issue a global ban as it pertains to localized issues within UK markets. Microsoft and Activision could present a case that the CMA needs to narrow its ultimatum ban to only UK regions and thus allowing Microsoft to close wherever else it’s gotten approval.

Lastly, Microsoft could forge ahead with a close on the deal and when sued by the CMA for “violating” its global veto, take the matter to court on grounds of illegality.

Whatever the case may be, the Microsoft and Activision deal is still an active merger and could remain one even with a failed appeal to the Competition Appeals Tribunal.

For now, Microsoft has the next few weeks to purse the path of least resistance with an appeal to the CTA, and perhaps, nudging the tribunal into various conflicts of interest CMA directors may have knowingly or unknowingly engaged with during the investigatory process.

Via Twitter

In a piece by Variety’s Cynthia Littleton, readers are privy to a seemingly more accessible Kotick since his last public interview in 2012. Littleton’s piece spans several topics with insight from Kotick on items such as Activision’s bid to buy Time Warner, the company’s promise to release a transparency report following its EEOC investigation, Kotick believing labor unions are at the heart of its harassment and discrimination claims, the confluence that led to Microsoft’s acquisition bid and future competition fears.

A large portion of the two-hour Kotick interview focused primarily on the “frat house” claims strewn about during its five year-long harassment and discrimination cases, with plaintiffs accusing the CEO of “failing to act to address internal culture issues, particularly at the Blizzard unit.”

While Kotick deflects blame for seemingly toxic environments employees are alleging that included sexual harassment, groping, comments, and advances as well as a company culture that paid women less than men and assigned them lower-level jobs regularly, he defends his position explaining that, “I wouldn’t be sitting here talking to you if any of what you read in the inflammatory narrative was truthful. No board of directors in a noncontrolled company is going to allow the CEO of an enterprise to stay running the enterprise if those things were truthful.”

With that being said, the Equal Employment Opportunity Commission (EEOC) settled an Activision investigation into similar harassment and discrimination claims in 2021 for $18 million.

The negative PR from protestors, employees, and recent litigation is also what Kotick partially attributed to an eventual deal with Microsoft. Aside from the bad press, in 2021 Activision’s stock dropped nearly 35% following the negative headlines as well as the company reporting delayed games and middling sales and reviews of the latest Call of Duty title, Microsoft’s acquisition bid was a light at the end of long tunnel for Kotick at the time.

While Activision stands in a much stronger position now in mid 2023, Kotick seems still committed to shepherding the Microsoft deal through and believes it’s not only the best move for the company but could be a harbinger for future US-based competitive innovation.

Regarding the regulatory push back from the US Federal Trade Commission (FTC) and the UK’s Competition and Markets Authorities (CMA), Kotick fears a rejected deal could set back the US when attempting to keep pace with non-US tech firms dedicating thousands of engineers and R&D into mobile gaming and streaming technologies.

In his view, the real threat is that U.S. firms fall behind not only China’s Tencent, ByteDance and Alibaba but also Japan’s Sony and Nintendo as leaders and innovators in the AI, streaming and mobile technologies needed to power the next generation of immersive video games. The non-U.S. tech giants have tens of thousands of engineers focused on research and development in these emerging arenas.

Fortunately, for Activision there still some chess moves to be made if the Microsoft deal is squashed, as the company rounds the corner on some of its harassment and discrimination cases, mends its relationship with the CWA and labor unions, and potentially adds $3B of Microsoft’s dollars to its current $12.6B cash-on-hand war chest.

However, after nearly three decades at the Activision helm, it appears Kotick is looking to land somewhere else, and do something else with a nice golden parachute from Microsoft while also handing off the company he revived from the brink of bankruptcy, to a steward of the gaming community like Microsoft.

Kotick will be laser focused on July 18, 2023 and August 2, 2023 as dates that alter the trajectory of Activision going forward, with the 18th opening the window of extensions from Microsoft to continue forward with the acquisition bid and the 2nd being Activision’s showdown with the FTC over approval.

The hearings will be conducted by the UK’s Competition Appeal Tribunal (CAT) between July 24 through July 31. The judge in the case, Marcus Smith, said

I’m not expecting it to take the whole of those 10 days but I would like the parties to err on the side of longer rather than shorter oral submissions. It seems to me that that is an excess that we can afford.

There is a tendency—and it’s very much driven by the Tribunal rather than the parties—to cut submissions to shorter than they perhaps ought to be. I want to do the reverse in this case. I want to have the parties understand that we will want to give them every opportunity to unpack the difficulties of this case in oral submissions and for us to have the time to do that.”

The CMA had been requesting more time to prepare for the appeal, pushing for a late September/October window for the hearing. For its part, Activision was also pushing for an accelerated appeal process, with CEO Bobby Kotick saying “I think we and Microsoft and our barristers…think that there’s a way to accelerate the process…we should be able to get an accelerated result.”

In any case, the FTC in the United States has sued to block the merger, and that of course will present an entirely separate challenge. That case won’t begin until August, well after the initial merger agreement between Microsoft and Activision expires on July 18.

Via Pure Xbox.

Featured image via Pymnts.com. 

Microsoft’s lawyer in the case, Daniel Beard, called the CMA the outlier in its decision. Beard pointed out that with the announcement today that South Korea’s FTC had approved the deal, the merger now has 10 clearances. Beard added that “it (the CMA’s decision) creates the uncertainty that risks delaying the deal.”

Activision also had some fresh criticism of the CMA’s conclusion, saying it “ignores the facts, the law, and all commercial reality.”

Microsoft is requesting a quick settlement of the appeal, and has asked the court to set a date for a four-day substantive hearing beginning on July 17. On Beard’s point that the appeal process could deal the acquisition a substantial delay, the CMA responded that a later hearing in September or October would cause “no incremental delay to the transaction.”

Then there is the FTC in the United States, which has filed a lawsuit to block the deal. That case is set to begin in August.

In its statement the regulator said its approval was unconditional, finding that the acquisition would not harm the console gaming market there. Its reasoning was that Activision Blizzard’s games account for only around 2% or less of the console gaming market share in South Korea.

Microsoft’s quest to acquire the game publishing giant hit a major roadblock back in April when the U.K.’s CMA chose to block the deal there. Microsoft will appeal the decision, but many analysts remain skeptical over its odds of overturning the CMA’s verdict. (read a full recap of the Activision Blizzard deal story here).

Nonetheless, the deal been faced with much brighter prospects since, with the European Commission, China and now South Korea all giving their approval. They join Saudi Arabia, Serbia, Brazil, Chile, Japan, South Africa, and Ukraine.

Via Videogameschronicle. 

Featured image via Pulse News. 

According to a post from Windows Central’s Jez Corden who cites patent lawyer Florian Meuller @FOSSPatents as a source, Microsoft may be able to point to a possible conflict of interest as it pleads its case to the Competition Appeal Tribunal (CAT).

Meuller unearthed a connection between the CMA’s now-serving senior director of Merger Reviews and Sony through the law firm Cleary Gottlieb, which currently represents the company as it protests the Microsoft and Activision deal.

The @CMAgovUK's Senior Director of Merger Reviews–who used to work for #Sony's law firm–will speak now at a @CompetitionLaws (@Concurrences) event on "Merger Remedies in a Post-Brexit Context":https://t.co/IahZWThxXr

Another speaker has current Sony/Google ties.

1/3

— Florian Mueller (@FOSSpatents) May 25, 2023

Mueller ironically points to a LinkedIn profile as evidence of Cleary Gottlieb and Sony connection as well as senior director at the CMA, Colin Raftery’s involvement with the two.

Furthermore, it’s being reported that Raferty may have also been the person who championed the rejection of Microsoft’s bid to acquire Activision Blizzard, despite his historical ties to an opposing party in the whole process.

Unabashedly, Raftery spoke earlier this week at the Merger Remedies in a post Brexit Context conference this week where he was joined by another speaker who shares a vested negative interest in the Microsoft and Activision acquisition as a representative of the legal firm RBB which represents both Sony and Google.

While it has been historically fruitless to get a CMA decision overturned through appeal as the process must prove the body acted irrationally, illegally or with procedural impropriety, it would seem that Microsoft may be able to lean specifically on Raferty’s historical conflict of interest-based decisions.

As Corden highlights in his write up about this new discovery, Raftery was not only central in the decision to block the Microsoft and Activision deal despite his history with Sony, he has also pulled a similar move in blocking the merging of supermarket chains ASDA and Sainsbury’s.

The block, in and of itself is less newsworthy than the fact Raftery served as legal advisory to Tesco, which happens to be the UK’s predominant supermarket chain, and who would have had a vested interest in keeping the chains separate.

As it stands, Microsoft has continued to rack up approvals from other major regulatory bodies in both the EU, China and Japan, since the UKs decision has come out.

Whether or not Microsoft knows of, or leverages Raftery’s potential conflict of interest in its appeal is unknown at the moment, but the company seemed confident going into the process that it could present something worthwhile to the CAT that would keep the acquisition train on the rails and headed towards an ultimate close.

According to the Seeking Alpha piece, China’s State Administration for Market Regulation offered one of the widest approvals to-date for Microsoft’s bid to acquire Activision with an unconditional approval at the end of its third review phase.

China’s approval comes days after the EU also approved the Microsoft and Activision deal with caveats around licensing agreements forcing the publisher to offer a deal to any current or future cloud gaming services that should jump into the fray.

While the CMA reiterated its stance on blocking the Microsoft deal immediately after the EU offered its conditional approval, it has been silent upon China’s announcement.

It should be noted that the CMA has recently been scrutinized by UK MPs in from the Business and Trade Committee who questioned the decision and its reflection on the region as a future tech mecha for companies. Never the less, the CMA stood firm on its initial conclusion as well as its ultimatum levied against Microsoft that would force the company to get written approval on the dela from the body before proceeding with any other business in the area.

For now, Microsoft is charging ahead with its review process with the US Federal Trade Commission lying in wait for its day with the company as its newest significant hurdle for the Activision deal.

The scrutiny came from MPs belonging to the Business and Trade Committee, who questioned CMA bosses Marcus Bokkerink and Sarah Cardell over the decision to block the merger between Microsoft and Activision. In particular the MPs expressed concern over how the decision could affect the U.K.’s reputation as a place for tech companies to do business.

Bokkerink doubled down on the CMA’s stance that the deal would weaken competition in the nascent cloud gaming market.

I understand the inference – that when a decision is made that blocks a deal, there are questions over whether the UK is open for business…The UK has always encouraged – and it is the CMA’s duty to encourage – open competitive markets. We are vigilant – as it is our duty to be – to investments that consolidate an already-entrenched market power…I would challenge the premise that there is an impact on international confidence on doing business in the UK.”

Nonetheless, execs from both Microsoft and Activision have been critical of the CMA, and have accused the regulator of not having a firm understanding of the video game industry. Activision CEO Bobby Kotick said upon the CMA’s conclusion last month,

(U.K. Prime Minister) Rishi Sunak has said they’d like to be the Silicon Valley of Europe or of the continent, and if deals like this can’t get through, they’re not going to be Silicon Valley, they’ll be Death Valley.”

Microsoft president Brad Smith called the decision “bad for Britain,” adding that “It does more than shake our confidence in the future of the opportunity to grow a technology business in Britain than we’ve ever confronted before.”

According to a press release from the European Commission, Microsoft has been cleared to acquire Activision Blizzard but is subject to a couple of conditions.

The European Commission has approved, under the EU Merger Regulation, the proposed acquisition of Activision Blizzard (‘Activision’) by Microsoft. The approval is conditional on full compliance with the commitments offered by Microsoft. The commitments fully address the competition concerns identified by the Commission and represent a significant improvement for cloud gaming as compared to the current situation.

The EU acknowledges many of the same complaints, concerns and criticisms as the CMA’s but ultimately, refutes many of the claims as ‘not a harm’ or not having a significantly negative impact on the industry.

The Commission’s in-depth market investigation indicated that Microsoft would not be able to harm rival consoles and rival multi-game subscription services. At the same time, it confirmed that Microsoft could harm competition in the distribution of games via cloud game streaming services and that its position in the market for PC operating systems would be strengthened.

Unlike the CMA, the EU concludes that it didn’t see a reason Microsoft would refuse to distribute games to Sony, nor Activision’s publishing line up joining the cloud gaming sector without the Microsoft deal. “Even without this transaction, Activision would not have made its games available for multi-game subscription services, as this would cannibalize sales of individual games. Therefore, the situation for third-party providers of multi-game subscription services would not change after the acquisition of Activision by Microsoft.”

Ultimately, to gain the approval of the EU, Microsoft seems to have agreed to some proposed remedies from the regulatory body that includes a free license to consumers in the EEA allowing them to steam, via any cloud game streaming service of all current and future ABK titles for which they have a license. Another concession of the deal’s approval includes a corresponding free license to cloud gaming streaming services providers.

Barring any other outstanding considerations, it seems the EU approves of Microsoft acquiring Activision Blizzard which puts the two companies at a 1 for 2 as they continue to seek approvals from three of the most stringent regulatory commissions globally.

The story is still developing, and Microsoft still has a date with the United States Federal Trade Commission later this summer, but getting the EU’s approval shines a bit of light through the CMA’s cloudy denial a few weeks ago.

While the CMA operates as an independent anticompetitive watchdog for the UK, it appears to be taking some bold moves on behalf of the region as it issues an order to restrict Microsoft and Activision from acquiring an interest in one another according to a Business Insider report.

Specifically, the CMA is calling on Microsoft and Activision Blizzard to have “prior written consent” from the regulatory before the two can proceed with any acquisitions related to each business.

Effectively, this would thwart any attempt by Microsoft and Activision to skirt around the UK while still pushing ahead with an acquisition deal if the two were to get the remaining international regulatory bodies to approve.

As of this reporting, neither Microsoft, Activision, nor the CMA have issued any public responses to the order.