Microsoft Clears Another Hurdle as Court Halts UK Veto Case

Microsoft Corp.’s once imperiled $69 billion bid for Activision Blizzard Inc. has fresh momentum.

(Bloomberg) — Microsoft Corp.’s once imperiled $69 billion bid for Activision Blizzard Inc. has fresh momentum. 

At a hearing on Monday, Britain’s Competition Appeal Tribunal “conditionally” paused a fight against a proposed ban on the deal handed down earlier this year by the Competition and Markets Authority (CMA), the UK’s competition regulator.

The news comes after last week’s unprecedented move by the CMA and Activison to start fresh talks on remedies. While the court’s pause is only provisional, with the recent failure of the US’s Federal Trade Commission to block the deal, its prospects now appear bright. 

Pressure came from all sides in the negotiations.

While the merger can go through in the UK without regulatory approval, there would be a cost. Pushing the deal to completion without CMA sign-off would breach UK law, potentially incurring a fine of 5 percent of the companies’ combined global revenue. 

The deliberations also faced something of a ticking clock: Had they gone past July 18 and Microsoft chose to walk away, it may have had to pay Activision a $3 billion breakup fee. 

In his ruling, Marcus Smith, the tribunal judge, said the court had been “gifted” with new circumstances that showed “the game has moved on.” 

Those circumstances included Microsoft’s truce with rival Sony Group Corp. that gave it a 10-year licensing deal for the Call of Duty franchise for 10 years. He suggested the agreement had made “a very significant difference,” but did not specify how.

The judge also laid out a key stipulation for his conditional judgment. By Thursday, The CMA must submit an explanation outlining why the situation has changed to such a degree that the previous decision can no longer stand.

Now, the companies must thrash out alternatives. That means restructuring the deal in such a way that it will revert back to an earlier stage of the approval process, one where CMA can consider the new structural remedies that could ease antitrust concerns.

Surprisingly, both the CMA and Microsoft had tried to suspend the case, arguing it had been overtaken by the agency’s surprise announcement last week that it was open to negotiating remedies to address its past concerns. 

Those concerns included the possibility that the tie-up would alter the future of the growing cloud gaming market, and eventually lead to reduced innovation and less choice for UK gamers.

The parties must also assuage fears about the anti-competitive impact of merging one of the industry’s biggest console makers with one of its biggest gamemakers. To help clinch the deal, the companies have weighed giving up some control of their cloud-gaming business in the UK, Bloomberg has reported. 

Neither company commented on the concessions offered to win over UK regulators this time. But a lawyer for the CMA told the hearing that talks had already been “productive,” and that Microsoft’s offer gives the parties “real confidence” that its concerns can be addressed.

Read More: Microsoft Holds ‘Productive’ Talks in Bid to Clear UK Hurdle

(Updates with more detail in the second paragraph)

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