Activision says UK was “irrational” in blocking Microsoft purchase

 

Activision isn't pulling any punches in its fight against the UK's regulatory attempts to block its merger with Microsoft. In a "motion to intervene" recently filed with the Competition Appeal Tribunal (and recently summarized on the tribunal's website), Activision excoriates the UK's Competition and Markets Authority for a "flawed conclusion" that was variously "unlawful, irrational, and/or disproportionate" and "arrived at in a procedurally unfair manner."

 

The appeal takes particular issue with the CMA's focus on cloud gaming in a vacuum, without taking into account competition from "native gaming" via games running on local hardware. The ability to easily switch from one type of game experience to the other means that cloud gaming should not be a "separate product market," Activision argues.

 

A source close to Activision's appeals process (who asked for anonymity to speak frankly about the appeal) put a finer point on this argument, saying that cloud gaming is a niche technology and that "most consumers continue to get games by download or physical disc because running the game on their local hardware gives them a much better experience."

 

"Gamers want to play games. They don’t care whether they are downloaded or streamed," the source told Ars. "The CMA’s approach to this question was irrational..."

 

Activision also takes issue with the CMA's "irrational" argument that Activision would put its game on cloud services even without a merger. On the contrary, our source said that "Activision’s senior leaders told the CMA that the cloud streaming model is misconceived" and that "the massive increase in mobile gaming shows consumers prefer to play games downloaded to their own devices, and streaming is quickly becoming obsolete as mobile processing power explodes."

“Totally disproportionate”

Even if you grant that cloud gaming is an important and separate market, though, Activision argues that its 10-year agreements with Boosteroid and other cloud providers provide a way to avoid anti-competitive market harms. The CMA failed to take these agreements into account, Activision says, and ignored proposed remedies that would fall well short of barring the entire merger.

 

"Prohibition was a totally disproportionate outcome given the deal’s global scope and obvious benefits to consumers," our source said. "The European Commission not only accepted Microsoft’s 10-year license of Activision content to cloud gaming providers, it found that the industry would be more competitive with the merger and licenses than without."

 

A case management conference that will help define how the appeal will move forward is scheduled for Tuesday afternoon. The CAT website notes that the group generally "aims to complete 'straightforward' cases in less than nine months."

 

Even accounting for that delay, though, Activision might not want to get its hopes up about a successful appeal. Industry analysts have noted that the CMA has a very successful track record before the appeals body.