On 13 October 2023 the Competition and Markets Authority (CMA) granted consent for Microsoft Corporation (Microsoft) to acquire Activision Blizzard, Inc. (Activision) (excluding Activision’s non-EEA cloud streaming rights).
Microsoft, supported by Activision (as intervener), had applied to the Competition Appeal Tribunal (CAT) under s.120 of the Enterprise Act 2002 to quash the CMA’s original decision to prohibit the acquisition, on the basis that the CMA’s decision was irrational and procedurally unfair, and prohibition of the US$68.7 billion deal – Microsoft’s largest ever acquisition – was disproportionate. The grounds of challenge concerned the CMA’s market definition; its assessment of certain cloud licensing agreements; its treatment of the counterfactual; its findings that the merged entity would have the ability and incentive to foreclose competitors; and its approach to remedies.
Following judgments in the US courts, refusing an action by the Federal Trade Commission (FTC) for a preliminary injunction and the FTC’s appeal, the CMA’s decision was the primary remaining obstacle to closing the transaction.
The hearing of Microsoft’s application was originally due to take place over six days, beginning on 28 July 2023.
A first application to adjourn the hearing was made by the CMA, opposed by Microsoft and Activision, and refused by the CAT on 29 June 2023 ([2023] CAT 43).
All parties then made a further application to adjourn the hearing, to allow them to engage in relation to proposals seeking to address the CMA’s concerns, which was granted on 17 July 2023 ([2023] CAT 48). The President of the CAT (Marcus Smith J) held that the parties’ agreement to an adjournment was insufficient. The CAT also needed to be satisfied that, among other requirements, there was a course proposed by the CMA for engaging with Microsoft’s proposals which had a proper legal and factual basis. The President held that these requirements were met, subject to receiving witness evidence from the CMA confirming why s. 41(3) of the 2002 Act was arguably engaged, and details of the processes that would be followed.
On 22 September 2023 the CMA published its Phase 1 decision in relation to a new merger inquiry into the anticipated acquisition. The new merger excludes cloud streaming rights in relation to past, current and future Activision console and PC games worldwide (excluding the EEA). The Phase 1 decision stated that certain remedies offered by Microsoft and Activision, in the form of proposed undertakings in lieu of reference (UILs), were in principle acceptable to address the CMA’s residual concerns.
On 25 September 2023, the CAT stayed Microsoft’s application for review of the CMA’s original decision, and adjourned the hearing of the application which had been due to commence on 23 October 2023. Following the end of the consultation period, on 13 October 2023 the CMA accepted the UILs and granted consent for Microsoft to acquire Activision, excluding Activision’s non-EEA cloud streaming rights.
Lord Grabiner KC, Sonia Tolaney KC and Douglas Paine (along with Lord Pannick KC, Brian Kennelly KC and Jason Pobjoy of Blackstone Chambers) acted for Activision, instructed by Slaughter and May. View the full text decision here.