Xbox BUYS Activision Blizzard!! Committed to MP COD On PlayStation And Nintendo As Well, It’s HappeningGIF

Will it go through

  • Yes

    Votes: 11 84.6%
  • Yeah, but I don’t like it

    Votes: 0 0.0%
  • Nah

    Votes: 0 0.0%
  • No, but it would’ve been nice

    Votes: 1 7.7%
  • I dono

    Votes: 1 7.7%

  • Total voters
    13

menace-uk-

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Sep 11, 2013
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MS team destroyed the CMA.

What many forgot..Activision want this deal so shock horror gave MS PS real COD numbers



Sony caught telling lies.

This whole thing is just getting pathetic.

It is pretty obvious that this purchase doesn't hurt the industry, doesn't create a monopoly, and Sony would be fine in the event of MS making COD Xbox exclusive.

This should have passed ages ago.
 

karmakid

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Indefinitely borrowing the information below from else where….

————————————————————————————————————————————

Here goes the first and second part about concessions/remedies.

This week I'll complete the other one.

I've included one or more examples for every type of possible remedy/concession. Some of them are more logical than others, so don't take them too seriously. :p

What are remedies and how could they affect the deal?

Remedies are tools used by competition authorities or regulators to maintain or restore competition in the market when an investigation about a transaction and the analysis of the different theories of harm reveals that the merger will likely result in substantial harm of competition.

In those cases, implementing some specific obligations, concessions and conditions to the transaction (remedies) can help to avoid the identified harms to the market, the merger can still go ahead and it doesn't have to be prohibited.

The terminology is a bit confusing because there are different ways to says almost the same. The general term is "remedy/remedies", but the European Commission calls them "commitments", the CMA refers to them as "undertakings in lieu" or UILs and in the US they are called "consent orders" (FTC) and "consent decrees" (DOJ).

Here we are going to call them remedy/remedies.

Parties start talking about remedies as soon as the negotiation of the deal begins. This means that between November 2021 and January 2022 MS and ABK started talking about them. The merger agreement is the instrument used by the parties for this.

When the Activision Blizzard Board of Directors considered the risks of the merger, the regulatory ones where obviously there (page 46):

The possibility that regulatory agencies may delay, object to or challenge the merger or may impose terms and conditions on their approvals that adversely affect the business or financial results of Activision Blizzard or Microsoft and the fact that Microsoft is not required to agree to remedies that would reasonably be expected to (x) result in a material adverse impact on Activision Blizzard and its subsidiaries, taken as a whole, (y) have a material impact on the benefits expected to be derived from the merger by Microsoft or (z) have more than an immaterial impact on any business or product line of Microsoft.

This means that MS can sell, license or restrict assets and rights from ABK to get the merger approved but only if that doesn't have a material effect on ABK, the benefits that MS was expecting from the deal or if that could even affect MS's businesses.

So, could MS accept to sell the Activision Publishing subsidiary (COD, Crash, Tony Hawk, etc) as a remedy to get the merger approved? In theory yes, but I think that such an operation would affect the benefits that MS is expecting from the merger. Therefore, very unlikely.

What types of remedies can be accepted and/or imposed?

They are generally classified as structural remedies when they require the divestiture of a business, an asset or IP rights or behavioural remedies when they impose an obligation to engage, modify or constrain the future conduct of the parties.

Examples of structural remedies:

- Divesting all or part of the business acquired to a suitable purchaser (for example, MS sells Activision Publishing to Take2 and keeps King and Blizzard).

- Carving a divestiture package out of the two merging businesses, with the purchaser keeping some of both businesses and selling some of them too (for example, Take2 buys Activision Publishing and some studios from MS, keeps COD and all the studios working on it but sells everything else to EA and Ubisoft).

- Keeping the acquired business and divesting the business already owned (for example, MS sells almost all the Xbox game studios but keeps ABK complete).

- The sale of key assets (for example, MS keeps ABK complete but sells all the studios working on COD excluding Treyarch, Infinity Ward and Raven).

Examples of behavioural remedies:

- Price controls (for example, Sony gets access to COD and other ABK games on the same terms and fees for 10 years).

- Commitments to continue supplying certain customers(for example, Sony gets access to COD until 202:cool:. In fact, this is the one that MS is offering right now.

- Licensing/assigning brands and/or IP rights; although this one can be a mix of structural and behavioural remedy (for example, MS keeps ABK almost complete but licences the COD IP + sells some ABK studios to Take2; or MS has to licence Windows Server to any new entrant on the cloud gaming market on fair and equal terms for 10 years).

- Firewall provisions, to restrict the access to and dissemination of competitively sensitive information within a company (for example, MS agrees to not access commercially sensitive information from Sony that ABK has obtained during the marketing agreement with them).

- Hold separate provisions, when the relevant business is run independently of the merged entity (for example, MS gets ABK complete but Activision Publishing starts operating separately, as a competitor.)

- Non-discrimination, or to treat other market participants in a fair and even-handed manner (for example, Sony and other competitors will get access to COD on the same date, with the same features, with the same level of interoperability, etc. until 2030).

- Anti-retaliation provisions, to prevent the merged entity from retaliating against customers or other market participants for transacting with the merged entity's competitors (for example, MS won't rise fees to EA or Ubisoft if they start working with Sony on a competitor to COD).

- Prohibitions on certain contracting practices, like exclusivity, bundling or tie-in (for example, MS cannot sign agreements with PC manufacturers to offer free promotions of Gamepass PC until 2030).

- Prior approval provisions, to impose additional filing or reporting obligations in respect of future transactions (for example, MS must inform regulators before any gaming acquisition from now on).

There a few more, but I think that these ones are the most common and relevant for this case.

Remedies, and not prohibitions, as the primary tool used by regulators (in the US, Europe and beyond) to address anticompetitive effects from mergers.

All the regulators have a preference for structural remedies because they are more useful to prevent significant impediment to effective competition and they don't require monitoring measures (always expensive for the regulator). But at the same time, regulators also accept behavioural remedies in certain cases (specially in vertical mergers, like the ABK one).

Dynamic industries or markets characterised by rapid change, innovation and disruption present unique challenges for merger control, as it is not always clear how a potential remedy can affect competition. The ABK case affects a couple of nascent markets (cloud gaming and subscription services) as well as a dynamic industry (videogames).

In any case, sometimes no remedy is good enough to deal with the adverse effects identified or maybe it's so complex that the regulator cannot determine if effective competition will be restored. In those cases, the deals are usually abandoned, or if not, prohibited.

How are remedies negotiated and implemented?

Planning for remedies starts very early in a transaction, normally while negotiating the deal.

Remedy planning involves: 1) identifying possible competition concerns; 2) identifying what remedies can address those issues according to legal standards; 3)the rationale for the transaction; 4) the efficiencies of the merger; 5) deciding what remedies to offer and when, specially in multi-jurisdictional cases.

In horizontal mergers only structural remedies will be acceptable. In the ABK deal there are horizontal issues but they are not relevant beyond the digital distribution of games. But even in that case it shouldn't be problematic.

Regulators are more sceptical of behavioural remedies, but they are accepted, particularly in vertical mergers. The majority of the issues discussed in the ABK deal are from the vertical side.

When designing and negotiating the scope of the remedies package, internal business documents can be problematic if they hint to or just say what assets the companies would be willing to divest. For example, the CMA gives a lot of importance to internal documents these days (there were lots of references to them during the Phase 1 decision).

When negotiating with regulators there are a few things to take into account: 1) timing; 2) scope of the remedies package; 3) the goals of the client; 4) preserving credibility with the regulator; and 5) gathering sufficient information about the regulators' concerns.

It's been said that there are two main approaches to remedy negotiations: the "funnel approach" and the "front-loaded approach":

A) The funnel approach involves starting the debate with the regulator by discussing the easiest issues first and working through each issue to convince the authority that the transaction raises no concerns regarding that issue. If the parties run out of time or there is no way to convince the regulator, it's time to think about remedies.

The main advantage of the funnel approach is that it sends a strong message from the parties that they are not willing to accept remedies beyond the minimum required. Therefore, the regulator will focus more on evaluating the arguments presented and not so much about what remedies should be adopted for now.

Problems with the funnel approach? 1) You need a lot of time; 2) if you didn't plan properly and at the end of the day remedies have to be negotiated, maybe you have to rush the process; 3) if after all the discussions the obvious solution was implementing remedies, the parties may loss credibility with the regulator.

B) The front-loaded approach involves presenting a proposal to the regulator almost from the beginning with what the parties are willing to divest to solve the potential issues very quickly. This approach is useful to close a deal as soon as possible, for example because the remedy package is clear and won't be questioned. The problem is that the parties will probably offer way more than what is really needed.

Both approaches can be used at the same time. For example, you can start with the funnel approach but when you see that the regulator is not going to be convinced, you switch to the other one.

Seeing that MS set a time limit of 18 months to close the deal and that they are not offering remedies by the end of any Phase 1, it looks like they are not willing to offer any huge remedies package and are using the funnel approach right now.

If the parties have to sell assets or businesses, a three way negotiation and sale process between the parties, the regulator and the purchaser begins. It can be a long and complicated process. I don't think that a divesture process is likely in this case, but let's just say that the purchaser has to be suitable. That means that the purchaser should have:

- The corresponding financial resources for the purchase
- A business plan for running the acquired business
- The appropriate back-office and other corporate infrastructure support from the seller
- The corresponding transition service agreements and supply agreements with the seller
- An appropriate level of knowledge and experience relevant to running the acquired business

Finding that purchaser and going ahead with the divesture has to be done in a specific period of time and always before the date set by the parties to close the deal.

During multi-jurisdictional cases, like this one, this whole process is a bit more complicated because the design of the remedies package has to take into account multiple competition authorities (in the ABK deal, at least 17). So, you have to present the transaction in a coherent manner but also the potential remedies.

In these cases the timing of notifications is important, because what one jurisdiction says can be used as a point of reference by the other ones. But sometimes it's better if you played them in parallel. It depends on the case. The geography of the relevant markets is important too. For example, if they are very local it's going to be harder to present a unified remedies package. But if the markets are global, then the issues are probably going to be very similar in every country and you could offer very similar remedies.

In the ABK deal the issues seem to be very similar in every jurisdiction and the majority of relevant markets have a global side. So, a global approach to remedies is more possible. The timing of notifications seems to indicate that almost all the big jurisdictions are running in parallel right now (UK, EU and US), with probably the US being the first to decide, then UK and finally the EU. But MS was upset with the CMA because they expected to get approval in Phase 1.

So, no idea if this was the original strategy or it changed due to the circumstances.

How do remedies work at the FTC, CMA and European Commission?

Coming soon
 

The Wolf King

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A 10 year guarantee before they have to do a new deal now...lying Jim can't deny MS is being more than fair

 

The Wolf King

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Funny thing is, if it gets blocked it goes to court then MS win and won't have to give anything to Sony.
 

karmakid

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Kvally

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The Wolf King

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I will now have to laugh if MS end up having to complete this deal through the courts because I can really see them doing f*** you Sony and just taking COD away from them after this lame arse attempt to stop the deal.

Sony's hypocrisy is amazing and the fact they are saying MS might have to do what they have already done is funny.
 
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karmakid

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