26 April 2023
If you are covering the news that the Competition and Markets Authority has prevented Microsoft’s proposed purchase of Activision, please see the following comment from Ben Barringer, equity research analyst at Quilter Cheviot:
“Microsoft’s anxious wait is finally over, but the Competition and Markets Authority’s (CMA) decision to prevent its purchase of Activision over fears the deal would stifle competition will have come as a real blow.
“The CMA’s decision has been one of the highest hurdles that Microsoft has had to face. Ever since Brexit, the UK regulator has taken an actively harsh stance when it comes to anti-competitive behaviour. This stance is ultimately what has led to its decision to put a halt to the purchase, as it concluded that Microsoft already has a dominant position and ‘cloud gaming needs a free, competitive market to drive innovation and choice’.
“While Microsoft had already proposed remedies to soften the CMA’s view, the difficulty lies in the fact that the behavioural remedies it proposed would have relied on ongoing regulation and monitoring which the CMA did not view favourably.
“Microsoft are expected to appeal, but they would have a long road ahead to get the CMA on side. They will need to raise the bar considerably in terms of offering remedies to the shortcomings identified, and even if they did so it still may not be enough to secure approval. What’s more, the CMA’s findings will be looked at closely by the other regulatory agencies, particularly those in the EU, and the trial in the US later this year will represent yet another hurdle.
“The CMA’s decision makes for a rather hefty bump in the road and will delay the closing of the deal, and whether they can get it over the line in the longer run will ultimately depend on how far Microsoft is willing to concede in terms of remedies. There will no doubt be a long list of pros and cons to consider, and just how many of the pros they can face giving up will be the real decider.”
