UK handling of Microsoft deal casts doubt on post-Brexit direction

LONDON, Aug 23 (Reuters) – The long-running battle between Microsoft ( MSFT.O ) and Britain over the Activision Blizzard ( ATVI.O ) contract took another turn on Tuesday, raising more questions than answers about the country’s approach to contracts. The post-Brexit period.

Britain’s Competition and Markets Authority (CMA) has been locked in a dispute with the U.S. software giant over its $69 billion bid to buy the “Call of Duty” maker since it objected to the takeover in April.

Minutes after the US regulator failed in its own bid to block the takeover in court, it said in July it was willing to revisit the case when Microsoft returned with a “comprehensive and complex” proposal.

On Tuesday, it said it would stick to its original decision to block it.

But it will see a separate restructured deal put forward by Microsoft, in which Activision would transfer its cloud streaming rights to a third party, France’s Ubisoft Entertainment ( UPIB.PA ), bypassing the European Union.

The agreement with Brussels is designed to allow Microsoft to license content to compete with cloud services.

EU antitrust regulators have said they will now look at whether the new rules will affect concessions already agreed with the US firm.

Ronan Scanlan, a competition lawyer at Arthur Cox in Dublin who previously worked for the CMA, said no one was doing well because of the “uncertainty and confusion” in Britain.

“Some may say the CMA has bent over backwards to accommodate Microsoft, others the result of the CMA overreaching in the first place,” he told Reuters.

See also  Biden canceled $1.2 billion in student loan debt for 150,000 borrowers

Strict stance

The CMA objected to the world’s largest gaming deal over concerns it would stifle competition in the new cloud gaming industry, and said Microsoft’s offer to make Activision’s games available on rival cloud gaming platforms did not go far enough to address its concerns.

The decision underlines the tough new stance the CMA will take after Britain’s departure from the European Union and the CMA becoming a stand-alone regulator against big tech.

Gustaf Duhs, a former CMA lawyer and head of competition at Stevens & Bolton, said the new scheme moved beyond the behavioral remedies the CMA disliked and towards something closer to a structural remedy.

“But it’s not a clean structural solution, because there’s still a fundamental connection between Microsoft and Ubisoft’s operations, and it’s limited rights that are being transferred,” he said.

He added that the CMA could seek assurances on how Ubisoft could exercise the rights, which would take the offer back into behavioral settlement territory.

Under the newly proposed deal, Microsoft-Activision would only provide gaming content to one player, which would be allowed to commercialize the rights to other cloud gaming service providers, Scanlon said.

He said the question must be asked whether the time taken to get to this point was time well spent for all parties involved. “Few other than the CMA will provide a definitive answer,” he said.

Antony O’Loughlin, head of litigation at law firm Setfords, agreed. “For Microsoft and other regulators, this represents an unnecessary step that the company is being forced to take by the overzealous UK regulator, which has yet to greenlight the deal,” he said.

See also  Smile Direct Club dentistry aligners closed

The clause in the Microsoft deal in Britain has questioned whether the CMA has the power to kill a megadeal if it is not compatible with the US, EU and China.

The CMA’s block in April drew the ire of union parties, saying Microsoft was closed for UK business.

On Tuesday it said it felt no political pressure to deal with the deal.

Tom Smith, partner at law firm Gerardine Partners and formerly legal director of the CMA, said both sides would portray the decision as a win, with the CMA gaining benefits that no other firm could achieve.

The CMA will avoid defending its original block in court, and Microsoft is finally ready to defend its contract.

“The process is tough, and there’s still a chance the wheels will come off, but we shouldn’t expect big tech deals to go through nowadays,” Smith said.

The CMA will now review the new proposal, with a notification deadline of October 18. If it finds that there are still competition concerns, it may order a much longer investigation.

Reporting by Kate Holden and Paul Sandle in London, Additional reporting by Martin Coulter in London Editing by Matthew Lewis

Our Standards: Thomson Reuters Trust Principles.

Get license rightsOpens a new tab

Latest articles

Related articles