Today, the UK Competition Appeals Tribunal (CAT) published Microsoft’s request to appeal against the local Competition and Markets Authority (CMA) following its decision to block the acquisition of Activision Blizzard.
He document reveals that the first step in the appeal procedure will be a case management conference on May 30, 2023 at 2:00 pm local time.
We also got a summary of Microsoft’s arguments against the CMA rulings, broken down into five main points below.
Reason 1: Respondent made fundamental errors in its assessment of Applicant’s current position in cloud gaming services by failing to take into account the limitations of native gaming (by which players access games installed on their devices via digital download or physical disc), undermining your SLC Finding:
a) In its market definition analysis, Respondent did not consider the potential shift to native gaming, resulting in an erroneous conclusion that cloud gaming services fall into a separate product market.
b) Even in Respondent’s limited and erroneous market definition, Respondent failed to take into account relevant restrictions outside the native gaming market in its competitive assessment of vertical foreclosure effects.
c) Respondent made fundamental errors in its calculation and assessment of the market share data for cloud gaming services and, as a result, failed to take relevant considerations into account in its competitive assessment.
Reason 2: The Respondent erred in failing to take due account of the three long-term commercial agreements that the Applicant had entered into with cloud gaming providers for the licensing of rights to broadcast their games, including content for cloud gaming. Activision, after the Merger (the “Arrangements”) in its evaluation.
Plot 3: Respondent’s conclusion that Activision likely would have made its game content available on cloud gaming services in the absence of the Merger was unreasonable and procedurally unfair .
Ground 4: Respondent’s conclusions that the Applicant would have the ability and incentive to shut out rival cloud gaming services by withholding access to Activision’s game content after the Merger was unlawful. In particular, Respondent’s analysis was affected by four errors, each of which, in isolation, separately, and/or cumulatively, renders the conclusions about capacity and incentive unlawful, unreasonable, and/or disproportionate.
a) Respondent erroneously relied on evidence that so-called ‘AAA’ games would be important to cloud gaming services to determine that Activision games in particular would be so important.
b) Respondent failed to take into account relevant evidence regarding immediate losses from a hypothetical foreclosure, which demonstrated that Applicant would have no incentive to deny access to Activision games to its cloud gaming rivals.
c) As set out in Ground 1 and Ground 2, Respondent failed to take into account (i) the relevant non-market restrictions and (ii) the Agreements.
Plot 5: In evaluating corrective action for the SLC, the Respondent:
a) erred in law by proceeding on the basis that it had a duty to impose what it described as a comprehensive remedy, for which reason it did not consider a range of remedies and assess their benefits and harms in the round; b) he illegally did not take into account the interests of courtesy;
c) You erred in rejecting Microsoft Cloud Remedy, which rejection was in all the circumstances disproportionate; and
d) Acted in breach of the duty of fairness of the Respondent’s common law and the CMA’s own resource guide
Microsoft is asking the CAT to set aside the CMA’s decision in its entirety and even force the regulator to pay the costs of the appeal request, in addition to any remedies the Court sees fit to add.
Curiously, the document also mentions that any person who believes they have a sufficient interest in the outcome of the process can request authorization to intervene.
The European Union recently approved the deal, including proposed remedies to level the competitive playing field in the cloud market, which Microsoft agreed to. A few days ago, we also learned that the deal was approved by the Chinese regulator, bringing the number of countries that have approved the acquisition to 37.
This leaves the UK CMA isolated in its ruling against the deal, with the US FTC matching its opposition, but having to go through a legal process in order to block it.
Meanwhile, a US District Court judge for the Northern District of California denied the preliminary injunction sought against Microsoft in the so-called “gamers’ lawsuit” that also aims to prevent the acquisition.