Microsoft and Activision Blizzard Might Sell Cloud Gaming Rights in the UK to a Third Party to Appease CMA

[UPDATE] The CMA has filed an extension of its investigation on the deal, which was supposed to close on July 18th but has been extended to August 29th, likely in response to the new talks with Microsoft. The CMA also said it aims to conclude the investigation as soon as possible and in advance of that date.

[ORIGINAL STORY] Immediately following the ruling of Judge Jacqueline Scott Corley against the FTC’s request for a preliminary injunction, Microsoft and the UK regulator (the Competition and Markets Authority) announced they were pausing their ongoing litigation at the Competition Appeal Tribunal to resume talks.

The following day, CNBC reported that Microsoft could agree to a ‘small divestiture’ to appease the CMA, which blocked the deal two and a half months ago due to competition concerns in the cloud market.

Today, Bloomberg reports some preliminary details on what exactly that divestiture might be. According to the anonymous sources cited in the article, Microsoft and Activision Blizzard might be planning to sell their cloud gaming rights in the United Kingdom to a third-party company, such as an Internet or gaming or telecommunications or even private equity company.

Of course, it remains to be seen whether this will be satisfactory for the CMA. The UK regulator already warned a couple of days ago that talks were still at an early stage and that a restructuring of the Microsoft/Activision Blizzard deal might even lead to a brand new investigation, which could take months.

The UK is just one front where Microsoft and Activision Blizzard are battling regulators, anyway. Yesterday, the US Federal Trade Commission appealed Judge Corley’s decision, asking the Ninth Circuit Court to overturn her ruling based on five main points:

• The Judge applied the standard for a full trial to a preliminary injunction request
• The Judge erred in finding an incentive to foreclose but considering that consumer benefits outweigh that
• The Judge shouldn’t have relied on the remedies offered by Microsoft (such as the 10-year deals to bring Call of Duty/Activision Blizzard games to other platforms)
• The Judge erred when it didn’t consider the effects of a partial foreclosure
• The Judge ignored foreclosure incentives for which the FTC reckons there is evidence

Microsoft and Activision Blizzard lawyers, of course, have shared a completely opposite opinion:

The FTC’s filing fails to provide any basis to expect that it will prevail on a single issue on appeal, much less run the table on the multiple findings it would have to reverse to prevail. Specifically,
as we will explain to the Ninth Circuit, the FTC does not identify a single legal error in this
Court’s reasoning, nor any reason to think that any of the complaints they lodge would have
changed the outcome.

The FTC also sought another motion for injunction pending appeal, but that was swiftly denied once again by Judge Corley. That means the decision rides entirely on the Ninth Circuit at this point, and the FTC needs an emergency stay today, or the deal will be open for closure immediately after that. There’s already evidence that Activision Blizzard will be delisted on the Nasdaq Index starting next Monday as it will be merged into Microsoft.

Meanwhile, the Turkish regulator has unconditionally approved the deal. It’s the 40th country to do so.