Activision (ABK)

What IP Should MS/ABK Bring Back?


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Approval by the Brussels-based regulator with a formal remedy giving rivals access to popular video games, including Activision's Call of Duty, would be a reasonable enough outcome given commission decisions in recent complex mergers to accept non-divestiture remedies. Think Google/Fitbit and LSEG/ReYnitiv.

But at this stage of the Microsoft/Activision review, an EC determination to accept Microsoft's licensing offer and approve the transaction would appear to be premature at best. At worst, such a conclusion could represent an abuse of process.

Microsoft hasn't yet offered a formal remedy to the commission. If the company does submit an offer, as expected, it must do so by midnight on March 16. The remedy would then be sent for third-party feedback through a market test. Only at that point would the commission's competition department be able to deYnitively conclude whether the deal should be approved.

Even so, The Capitol Forum is aware of influential voices within the EC that believe the deal should be approved with non-divestiture conditions. That view may well end up being correct, but an important and indispensable part of the EC process must first play out.

Meanwhile, Microsoft last week participated in a "response hearing" in London at the Competition and Markets Authority. The UK watchdog has set out various ways the company could attempt to address misgivings about the Activision merger, including asset divestitures and an access remedy. All these options are said to have been discussed at last week's meeting, and Microsoft is said to have been buoyed by the amount of time the regulator spent discussing the access remedy option. The CMA, though, is obliged toconsider each remedy it has proffered.

Still, the UK authority remains a staunch defender of its position that behavioral remedies should only be accepted in the most exceptional circumstances, putting the Activision deal at significant risk of being blocked.
 
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Really?

hasn't MS handed over like 2 million documents? lol.

No wonder the FTC always get sh!t on in court.
I think they blew most of their budget on another case and now don’t have the as many to go through all the documentation. But it’s also a tactic to delay or prolong and or test their willingness/patience. Sony be like “nijongo jozu fam” with a similar tactic, originally handing over documentation in Japanese.
 
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A summary of what ms said to the CMA (not mine)

The 10 year deals (already signed) prove Microsoft is incentivized to release CoD broadly

- Redacted math stating day and date ABK content in Gamepass is beneficial for UK consumers

- Sony refuses to deal because they want to protect their market dominant position

- Precedent around Vertical concerns around input foreclosure is on Microsoft's side

- Sony cannot be foreclosed from losing access to one game. Between 3% and [redacted]% is how many users Sony would lose if CoD were made exclusive. Harm to Sony's bottom line of [redacted] would not result in a substantial weakening of Sony's position, therefore the CMA's views that making CoD exclusive could result in an SLC is irrational.

- Microsoft doesn't have an incentive to remove CoD from Playstation. CMA's financial models weigh a 5 year benefit of making CoD exclusive for Microsoft vs the financial losses from making CoD exclusive for 1 year. This error once corrected would show there is no incentive to make CoD exclusive.

- Minecraft is the most close comparison to what they'd do with CoD. What they've done with Zenimax has no bearing on what they'll do with CoD.

- The CMA states that Microsoft's ability to use it's current assets does not come into play when they formed the theory of harm that making CoD exclusive would foreclose rival cloud competitors. However, they rely heavily on Microsoft's ability to use it's current assets to form their theory of harm.

- Absent something the CMA states isn't relevant, there is no SLC for cloud gaming.

- Activision games would not be available to cloud gaming services absent this merger. The evidence points to this being true, and once taken into account the Cloud gaming SLC is not related to this merger.

- Even if Activision would release their games to cloud gaming services, there is no evidence that CoD would be important to a cloud services success. The CMA relies on it's console SLC to claim CoD would be important for cloud gaming. But cloud and console gaming is targeted at different consumer sets, so what may be important for console may not be important to cloud. The evidence presented by the CMA is nowhere close to the CMA's evidentiary standard.

- The CMA has evidence that contradicts CoD would be important to cloud gaming. CoD is less prominent on PC relative to consoles and other PC games.

- The Nvidia agreement addresses any SLC in cloud gaming. This deal is positive for consumers and would not be present absent the merger.

- Even if the CMA confirmed SLC for console and cloud gaming, the remedies package proposed by Microsoft would guarantee parity between Playstation and Xbox in regards to CoD and ensure wide availability of ABK games on cloud gaming services.

- The criteria for the CMA to accept behavioral remedies of this nature is clearly met and is the preferred option over structural remedies or prohibition, as behavioral remedies would preserve the relevant customer benefits of this merger.
 


The Federal Trade Commission's senior attorneys are leaving at a pace not seen in at least two decades, adding to the challenges facing the agency as it pursues expansive rulemaking.

Seventy-one "line staff" attorneys—non-leadership senior attorneys at the top of the federal government pay scale, known as GS-15s—left the agency in the two-year period between 2021 and 2022, according to data obtained by Bloomberg Law under the federal Freedom of Information Act. That's the highest number of departures in the category for a comparable two-year period since 2000.

The wave of departures comes as the FTC undertakes an ambitious rulemaking agenda under Chair Lina Khan, including a proposed ban of employers' noncompete agreements and limiting companies from engaging in "commercial surveillance" and selling or sharing collected consumer data. Khan has aggressively pursued antitrust enforcement, seeking to revive dormant laws in a bid to reign in Big Tech companies.

In total, 99 senior-level career attorneys—including line staff and leadership who are GS-15 and executive service attorneys—left the agency in the two-year period, according to the data. Of the GS-15s who departed, 27 were long-planned retirements, said FTC spokesperson Douglas Farrar.

The FTC, whose missions include antitrust enforcement and consumer protection, employed in total about 750 attorneys as of the end of 2022.

"You lose a lot of institutional knowledge" when senior staff and career leaders leave, said Debbie Feinstein, the former head of the FTC's Bureau of Competition and now a partner at Arnold & Porter. "Career staff know whether something has been looked at before, whether it's been litigated before. And they've been through things that they know is invaluable."
 

The company is likely to win EU clearance for the deal with such licensing deals and other behavioural remedies, sources have told Reuters while the jury is still out on whether the UK competition enforcer will do the same.
 
From the lawyer

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New report from MLex:

- Microsoft committed to EU regulators last night to make Activision Blizzard's catalog of games, including Call of Duty, available to rival cloud gaming servicesaccording to MLex.

- The offer does not include concessions to ease EU concerns over how the takeover might impact Sony's PlayStation or Google's PC operating system, indicating that the EC has narrowed its objections to the deal to focus on cloud gaming.

- The 10-year remedy proposal follows the template of recent deals announced by Microsoft with cloud gaming providers Nvidia, Boosteroid and Ubitus.

- The EC is consulting market players on Microsoft's cloud gaming offer and now it has until May 22 to issue a final decision.


So, the EC didn't drop the cloud gaming concerns. In fact, those are the main ones right now.

That's very interesting because then the CMA and the EC are more aligned than we thought regarding the theories of harm. The main difference would be that the CMA is also concerned about the console market (it looks like both regulators have dropped the concerns about PC OS).

The timing between the CMA and the EC is again different (now the CMA could be a few weeks ahead).

In any case, if the CMA goes first, April 26th is still the more relevant date.

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My guess is that MS is offering a global remedy package. It's the normal way in cross border mergers. So, the EC, CMA (and the FTC if they have a chance) will be offered almost the same remedies.

In any case, if the EC is not concerned about the console market (including subscription services) and MS is not offering anything in that sense, that could potentially open the door to small differences in the remedy package. For example, that COD is only available on PS+ in UK, but not in Europe (where only Game Pass would have it).

Something similar could happen in the US depending of how MS deals with the FTC (going to court or through a consent decree, and of course, only if they have a chance to do so).

Anyway, things are going to get interesting!
 
All while this mess is going on Adobe scooped up Figma, virtually eliminating one of their competitors and T-Mobile is adding Mint mobile to it's growing list.
 
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From the lawyer

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New report from MLex:

- Microsoft hopes that the remedy package offered to the EC will put pressure on the CMA.

- Microsoft has now formally committed to making Activision's portfolio of games, including Call of Duty, available on rival cloud-gaming platforms.

- "More striking is the absence of any formal commitment to address key concerns raised by rival Sony about the deal's impact on its PlayStation, and Google about the deal's impact on its ChromeOS cloud-first operating system."

- As recently as Feb. 21 (the hearing), the EC still had concerns about those markets.

- Microsoft's offer comes after intense discussions with officials probing the deal, and the market test should be considered a good sign.

- Under the terms of its in-depth review, the commission has until May 22 to rule on the deal, although it will soon need to circulate a draft decision internally and to national authorities.

- The support of Nvidia has been key, according to MLex.

- The extent to which Sony would benefit from the remedy on cloud gaming is unclear. Sony's primary complaint has been that Microsoft would remove Activision Blizzard's games from its PlayStation, or at the very least degrade their performance on the Sony console to drive its users to the Microsoft Xbox. "That appears to have fallen on deaf ears at the EU competition enforcer."

- The offer from MS (to Sony) presumably still remains on the table. So, at some point Sony may say yes. In any case, most probably Sony will first shift its attention to the CMA.

- "No doubt Microsoft will have pointed CMA investigators to the EU regulator's latest conclusions on that point. If Microsoft can get traction there and put a dent in the narrative against the deal, that would be no mean feat — but it may not be enough."

- However, the CMA's last public word on the subject (acceptance of behavioural remedies) still remains:"None of the circumstances in which the CMA would select a behavioural remedy as the primary source of remedial action in a merger investigation ... appears to be present."
 
Sites still trying that narrative? MS never said no future Bethesda games would be guaranteed to release on other platforms.
 
From the lawyer

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THE LAST 10 DAYS

- March 8th: The CMA published the responses from the parties (MS and Sony) to the suggested remedies.

- March 10th: MS published a website explaining the benefits of bringing Call of Duty to 150 million more players.

- March 14th: Microsoft signed a licensing deal with cloud gaming provider Boosteroid.

- March 15th: Microsoft signed a licensing deal with cloud gaming provider Ubitus.

- March 16th: MS officially offered remedies to the EC, making ABK's catalog of games, including Call of Duty, available to rival cloud gaming services. There are no remedies regarding console and PC OS markets. Second update about the topic.

- March 16th: New provisional deadline for the decision from the EC, May 22nd 2023.

- March 16th: The CMA published 9 responses to the provisional findings, MS, ABK, Sony and 6 market participants.

- March 17th: The lawsuit from gamers has been dismissed and they'll have to redraft the complaint.

NEXT KEY DATES:

- Late March 2023: meetings and discussions with the CMA regarding the remedies working paper.

- Late March 2023: the EC will conduct the market test for the remedies proposed by MS.

- April 18th 2023: second extension of the original outside date. If MS quits by that date they have to pay a termination fee of $2,500,000,000; if they don't, the outside date gets extended until July 18th 2023.

- April 26th 2023: final report and remedies from the CMA.

- April 28th 2023: decision from New Zealand.

- April - May 2023: decision from the SAMR in China.

- May 22nd 2023: final decision from the EC.

- July 18th 2023: The end of the second extension and final outside date in the merger agreement. If MS quits by that date they have to pay a termination fee of $3,000,000,000; if they don't, they'll have to renegotiate the outside date with ABK.

- August 2nd 2023: beginning of the FTC in-house trial.

- Early 2024: decision from the FTC administrative law judge.

- Anything beyond that: unknown