Activision Appeals CMA Ruling On Its Activision Acquisition, Calling It ‘Irrational’

Legal Issues

from the sick-burn dept

Microsoft’s acquisition of Activision Blizzard plods along with a drip of news coming out every so often. For those of you with your pencils and scorecards ready, the current state is: the FTC has sued to stop the deal in the States, the EU has given its approval for the purchase to move forward, and the UK’s CMA blocked the purchase outright.

Obviously Microsoft could not have been pleased with the CMA’s decision. In the least surprising news of all time, it has appealed that decision to the Competition Appeal Tribunal (CAT? Really meow?) and it is not mincing words in its complaints. I also don’t know that this appeal is going to get very far, since it primarily focuses on the issues in the cloud gaming space, acting as if that was the only issue the CMA had with the purchase.

The appeal takes particular issue with the CMA’s focus on cloud gaming in a vacuum, without taking into account competition from “native gaming” via games running on local hardware. The ability to easily switch from one type of game experience to the other means that cloud gaming should not be a “separate product market,” Activision argues.

A source close to Activision’s appeals process (who asked for anonymity to speak frankly about the appeal) put a finer point on this argument, saying that cloud gaming is a niche technology and that “most consumers continue to get games by download or physical disc because running the game on their local hardware gives them a much better experience.”

And this is where Microsoft’s inking 10 year deals to keep Call of Duty on other cloud and/or console platforms comes into play. Microsoft points to those deals as though they were of infinite length, suggesting two things. First, that the cloud gaming market will have sufficient options for consumers due to those deals. Second, that cloud gaming is a niche market that will soon go away entirely because… reasons?

“Gamers want to play games. They don’t care whether they are downloaded or streamed,” the source told Ars. “The CMA’s approach to this question was irrational…”

Except this is quite silly. Just because Stadia bombed doesn’t mean cloud game streaming as a whole is going to go away, or even remain stagnant. The last 10 years of technology has one central theme above all else: cloud services are the path of the future.

But, says Microsoft, even if you allow for cloud gaming as more than a niche market, it still doesn’t matter because, again, Microsoft inked 10 year deals with other console makers as well.

Even if you grant that cloud gaming is an important and separate market, though, Activision argues that its 10-year agreements with Boosteroid and other cloud providers provide a way to avoid anti-competitive market harms. The CMA failed to take these agreements into account, Activision says, and ignored proposed remedies that would fall well short of barring the entire merger.

“Prohibition was a totally disproportionate outcome given the deal’s global scope and obvious benefits to consumers,” our source said. “The European Commission not only accepted Microsoft’s 10-year license of Activision content to cloud gaming providers, it found that the industry would be more competitive with the merger and licenses than without.”

This was always going to be Microsoft’s tactic the moment the EU approved the purchase: Hey, CMA, the EU is cool, baby, so why can’t you be cool, too? But that’s nonsense. There’s a reason there isn’t some homogenous global regulatory body approving or blocking these deals. What’s good for the EU may not be good for the UK. Or America. And an appeal that amounts to, “Hey now, all you had to do was take our word that everything will be fine and you didn’t do that, therefore we appeal” isn’t the most compelling case.

And, frankly, the CMA has a pretty good track record when it comes to surviving these appeals.

Activision might not want to get its hopes up about a successful appeal. Industry analysts have noted that the CMA has a very successful track record before the appeals body.

It wouldn’t be unheard of for the appeal to work, of course, but Microsoft might want to start thinking about its contingencies if it fails.

Filed Under: antitrust, call of duty, cma, competition, uk
Companies: activision blizzard, microsoft