After the UK loss, Microsoft's chances of making a deal with Activision vanish.
With the UK's move to block the biggest gaming deal ever, Microsoft Corp.'s plan to buy Activision Blizzard Inc. is pretty much dead in the water.
The Competition and Markets Authority said on Wednesday that none of the proposed solutions can solve the problems it has with the $69 billion takeover. The only answer, it said, is to stop the deal. Microsoft and Activision have said they will appeal the ruling, but the UK block and the opposition of the merger by the US Federal Trade Commission mean that the deal is not likely to happen.
The UK's ruling is binding on the whole world, and if Microsoft's appeal fails, the deal could be stopped for good.
The European Commission hasn't said anything about it yet. The EU could disagree with what the CMA says, but it's not clear how the deal could be broken up to make everyone happy. The EU is supposed to make a ruling by May 22, but Tom Smith, a competition lawyer at Geradin Partners and former CMA director, said that by then it might not matter.
"Microsoft worked hard to make the CMA happy, but in the end, the CMA's decision seems to ban the deal everywhere," he said, citing Meta Platform Inc.'s failed attempt to buy GIF search engine Giphy, which the regulator blocked for the second time last year after the social media platform lost its appeal.
Timing could be the most difficult part. The deal between Microsoft and Activision Blizzard to join ends on July 18. Activision Blizzard could pay a $3 billion fee to get out of the deal, even though it can be extended. If the companies keep doing what they are doing, they now face a long road of lawsuits on two countries.
In December, when the FTC sued to stop the merger, Microsoft said it still had ways to get permission. The company that makes Xbox wanted to get the UK and EU to agree to a global behavior fix, and then talk with the FTC again. If the US regulator didn't give in, the company bet that it could convince a US judge that those binding global remedies solved the competition issues.
With the UK's ruling making the FTC's worries even stronger, that strategy has become much harder to use all of a sudden. As of now, the FTC trial won't start until August 2, and a ruling probably won't be made until the end of the year.
The appeals process in the UK is also long and rarely changes the decision because the panel only looks at whether or not the decision was legal. When Meta protested a UK order to undo its purchase of Giphy, for example, it took eight months for the Competition Appeals Tribunal to make a decision. It then sent the case back to the UK regulator, which upheld the block.
It's hard to say whether the CMA's decision means that the whole deal will now fall apart. But there's no doubt that the parties' lawyers will be thinking very hard about how they might be able to save it.