From the lawyer
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Now that we have entered the "market test for remedies" stage with the EC (sooner or later with the CMA), some info about what this means:
- The European Commission (EC) is going to consult third parties on the cloud gaming remedies that have been submitted by MS. This is called a market test of the proposed remedies.
- The EC has discretion on whether to conduct (or not) a market test of merger remedies. In any case, the EC uses them regularly.
- This market test allows the EC to obtain information and views from market participants as to whether the proposed remedies will be workable and effective in removing the competition concerns (in this case, about cloud gaming). This is in part used to mitigate the information asymmetry between the parties and the EC.
- The idea of the market test is that competitors, customers and suppliers of MS/ABK may be able to spot shortcomings in a remedy that are hidden for non-insiders.
- The third parties that are consulted may include competitors (Sony, for example), customers, suppliers and other interested parties. The questions can relate to anything that is relevant to assess the proposed remedies (scope, longevity, interoperability, complexity, etc).
- To ensure that third parties can comment meaningfully on the remedies, MS/ABK must make available a non-confidential version of the remedies. That version must allow third parties to fully assess the workability and effectiveness of the proposed remedies. If there are excessive redactions, that would be a problem and the EC would have a harder time to assess the adequacy of the remedies.
- The replies to the market test form part of the evidence on the basis of which the EC will assess whether the remedies are adequate. In theory, assessing the replies to the market test is not simply a matter of counting favourable or unfavourable views (like a popularity vote). So, numbers alone shouldn't be decisive.
- The EC will review all individual responses and will assess the market test according to the totality of the replies. In assessing the replies, the EC will take into account elements such as the consistency and relevance of the reply, the expertise of the respondent, how well the reply is substantiated or if the replies could be guided by self-interest. The EC knows that competitors, for example, may have a hidden agenda. In those cases, the weight given to their replies will depend on how well their reply is substantiated and whether it is echoed by other respondents.
- When the proposed remedies are consulted to market participants, the EC also sends a copy to the national regulators of the Member States. This way, the EC can benefit from the experience and expertise of national competition authorities, who may have dealt with the relevant markets or similar commitments in prior cases.
- The CMA takes a different approach to market tests, focusing on a narrower set of customers with a more in-depth form of engagement. The CMA doesn't like too much the questionnaire format used by the EC because they believe that in the end it really works like a popularity vote
- The Cargotec - Konecranes case is probably the most recent example (early 2022), where these different approaches diverged (the EC accepted the proposed remedies, the CMA rejected them a month later and the deal was finally abandoned).
From the lawyer
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Since at least September 2022, the CMA knows about Redfall (and Starfield) becoming exclusives once MS bought Zenimax (implying that there was a PS5 version in development):
Decision from Phase 1 (September 15th 2022)
The CMA found a pattern of Microsoft acquiring development studios and making their upcoming games exclusive to Xbox. All of these studios developed games for other gaming consoles before being acquired by Microsoft. These include:
(a) ZeniMax Media: Microsoft chose to make several of ZeniMax's major gaming franchises exclusive in consoles to Xbox, including the upcoming games Starfield and, based on Microsoft's public statements, The Elder Scrolls VI, following its 2021 acquisition.
Microsoft's response to the Issues Statement (October 31st 2022)
Microsoft stated that it would "honor all of ZeniMax's obligations to continue to make its current games available on other gaming hardware, including two planned console exclusive releases for the Sony PlayStation 5: Deathloop and Ghostwire: Tokyo". The games were released on an exclusive basis on PlayStation with high Metacritic ratings.
Microsoft has not taken any existing ZeniMax titleswhich were shipping on PlayStation on 9 March 2021 (the date when it closed its acquisition of Zenimax) off Playstation or other platforms.
Microsoft was clear that "[REDACTED]". The first Xbox and PC exclusive games will be Starfield and Redfall(both entirely new games) which are scheduled to be released in 2023 (i.e., some 2 years after the ZeniMax acquisition).
I don't think that this statement adds anything new to the review process.
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