Why Microsoft’s $69 Billion Activision Deal Hinges on London Not Washington

(Bloomberg) — Microsoft Corp.’s $69 billion Activision Blizzard Inc. takeover faces a key decision in Britain as the nation’s merger watchdog marks its arrival as a global regulator with findings that could set the trajectory to the mega deal finalizing — or falling apart.

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The Competition and Markets Authority is expected in the coming days to issue its provisional findings, signaling whether it aims to block the deal or clear it with specific remedies such as selloffs. The regulator already flagged concerns that the deal could cause competition issues in the consoles and subscriptions market, as well as the more nascent cloud gaming sector.

Microsoft first announced the transaction last year, looking to add blockbuster games like Call of Duty to a business that already includes the Xbox console, the Halo franchise and Minecraft world-building software.

But the tie-up has fallen foul of global regulators who fear that Microsoft could make it harder for rival platforms to get unfettered access to Activision’s most popular titles. Crucially, the CMA’s filing will come before decisions from the European Union and the US Federal Trade Commission, which is locked in a lengthy legal process after formally suing to veto the transaction.

“The CMA’s decision is key because if it chooses to block the deal, there is little recourse for the companies — UK courts rarely overturn a CMA merger decision,” said Jennifer Rie, an analyst at Bloomberg Intelligence. “Conditions will have to be thorough, beyond just licenses for Call of Duty,” she said, adding that “an unconditional clearance is unlikely.”

Microsoft this week received the EU regulators’ initial findings in a so-called statement of objections, laying out the bloc’s key concerns about the deal, according to people familiar with the review. The tech firm last year already publicly offered to give its rival Sony Group Corp. a 10-year license for Call of Duty, but it will now have several weeks to formally submit remedies in the EU probe in line with the formal concerns.

Read More: US Filed Microsoft-Activision Suit to Head Off EU Settlement

Unlike in the EU, where regulators and Microsoft already informally discussed possible remedies, the UK regulatory process has traditionally remained less accessible and discussions weren’t happening before the CMA’s preliminary decision.

However, updated CMA guidance from last year now allows companies to propose potential remedies ahead of provisional findings.

“The FTC may rely on the CMA to block it,” said Anne C Witt, a professor of law at EDHEC Business School. “The European Commission just sent out a statement of objections, so there’s no way they can get there before the CMA. The CMA is going to win this one and it will be interesting.”

The CMA emerged from the shadows of the European Commission after the UK’s departure from the EU — with the regulator perusing deals that had previously met their fate in Brussels rather than London. In recent shows of strength, it’s taken on Big Tech companies, including telling Meta Platforms Inc. that it must reverse its acquisition of Giphy after worries it could take a strangle-hold of the GIF market.

“To advance the gaming market to the benefit of all stakeholders, we believe it is important to consider clear and easily enforceable solutions to potential competition concerns,” a Microsoft spokesperson said.

“Our commitment to grant long-term access to Call of Duty to Sony, as well as Nintendo and Steam, accomplishes this be preserving the deal’s benefits to consumers and developers and promoting competition in the market,” they said.

A CMA spokesperson declined to comment