UK’s Competition and Markets Authority (CMA) Warns of Possible Fresh Investigation into Microsoft’s Merger with Activision Blizzard

The UK’s Competition and Markets Authority (CMA) may launch a fresh investigation into Microsoft’s merger with Activision Blizzard

The CMA has warned that it might need to conduct a new inquiry into Microsoft’s planned merger with Activision Blizzard. This announcement comes after legal proceedings were put on hold in order to reach an out-of-court settlement following the deal’s clearance in the United States.

CMA invites Microsoft to propose a restructured transaction

The CMA stated that it is open to considering any proposals from Microsoft to restructure the transaction and address the concerns that initially led to the deal being blocked. If Microsoft suggests a restructured deal, it could result in a fresh investigation. The CMA spokesperson stated, “Merging parties don’t have the opportunity to put forward new remedies once a final report has been issued, they can choose to restructure a deal, which can lead to a new merger investigation.”

Microsoft’s push to secure the deal

Microsoft and Activision Blizzard are currently discussing options to modify the transaction. However, these discussions are still at an early stage and the next steps will be determined in due course. Microsoft aims to complete the deal before the current merger agreement expires on July 18.

Prior concerns regarding the impact on the cloud gaming market

In April, the CMA blocked the deal, citing concerns about its potential impact on the emerging cloud gaming market. Microsoft was scheduled to appeal the decision in court, but the litigation has been suspended for now.

The CMA’s tight deadline

The CMA has a statutory deadline of 40 working days to complete the initial phase of its merger review process (Phase 1). With this deadline looming, it is unlikely that a fresh investigation will be completed before next week.

Microsoft’s proposed divestiture

According to CNBC’s David Faber, Microsoft has offered a “small and discrete” divestiture to the CMA. It is believed that this proposed solution will be accepted by the watchdog.

Analysts’ prediction

Financial analysts Nick McKay and Michael Pachter from Wedbush Securities predict that Microsoft will successfully close the deal before the deadline. They suggest that Microsoft can comply with the CMA ruling by creating a separate operating subsidiary, Game Pass UK PLC, with an independent board responsible for keeping Activision content off the Game Pass platform during the appeal process.