The initial position of the CMA, the competition regulator in the United Kingdom, regarding the Activision Blizzard purchase agreement, keep giving what to talk about. Unlike the organizations of the other countries that have evaluated the purchase, the CMA has been quite reticent regarding the situation that could be triggered if it were to accept it; so much so that some have come to accuse it of being partisan (including Microsoft itself) and of obeying private interests and not those of the general market. Be that as it may, the fact that the CMA has been the only body, to date, that has shown its doubts regarding the takeover of Activision Blizzardmakes many wonder what would happen if the CMA did not accept the purchase.
What happens if the CMA rejects the purchase of Activision by Microsoft? We tell you everything
1.- First Bethesda, now Activision: this is how concentrations of companies are regulated in the European Union.
The first thing we have to take into account is that company concentrations are regulated, as far as the European Union is concerned, in articles 101 and 102 of the Treaty on the Functioning of the European Union and in the Community Regulation on concentrations (Regulation (CE) nº 139/2004 of the Council). Without evaluating everything they say, we must understand why the purchase of Activision Blizzard by Microsoft must comply with the provisions of that Regulation. And for this we have to go to his first article:
“Article 1
Area of application
This Regulation shall apply to all concentrations with a Community dimension as defined in paragraphs 2 and 3 of this article, without prejudice to the provisions of paragraph 5 of article 4 and article 22.
A concentration will have a Community dimension when: a) the total turnover worldwide carried out by all the affected companies exceeds 5 billion eurosand b) the total turnover at Community level carried out individually by at least two of the companies affected by the concentration exceed 250 million euros«.
Seeing these economic amounts and taking into account that Microsoft’s turnover was, in 2022, 198,270 million US dollars, it is clear that the acquisition of Activision Blizzard is affected by Regulation 139/2004 and that, in order to be accepted by the European Union, the procedures contemplated therein must be followed.
But there is another aspect that we cannot forget: neither the United Kingdom nor Northern Ireland are now part of the European Union. The famous “Brexit» became official with the signing of the Withdrawal Agreement between the European Union and both countries; Agreement by which it was determined that, as of December 31, 2020, neither the United Kingdom nor Northern Ireland would no longer form part of the Union. considering a problem that did not occur with the purchase of Zenimaxgiven that this purchase was prior to the abandonment of the European Union of these two countries.
After Brexit, is the United Kingdom still affected by the competition rules of the European Union? Does what the Union decides or what the United Kingdom decides prevail, in case of conflict? Does each territory go its own way and do what it wants?
2.- Post-Brexit situation: the United Kingdom and the European Union are independent and cannot influence each other.
Although neither the United Kingdom nor Northern Ireland are already Member States of the European Union, the commercial relations between the different territories are still there. So it has been necessary to articulate a series of processes that determine basic rules in the market; for example, with regard to subsidies, aid to companies, police, immigration and economic issues. Including, of course, company mergers. And this mechanism is Trade and Cooperation Agreement.
And what does this Agreement say about competition rules and relations in this matter, between the European Union and the Brexit countries? So the following:
These are the conditions of Sony to accept the purchase of Activision Blizzard
As we can see, both the European Union and the Brexit countries recognize mutual independence to assess compliance with competition rules. Based on a series of basic principles, each one can decide to accept a merger or not, without the European Union’s decision binding the CMA and vice versa. Which could lead to the following situation:
3.- What happens if finally the CMA does not accept the purchase of Activision Blizzard but the European Commission does? This has been other blockades of the CMA.
Although it is normal for competition agencies to collaborate with each other and this obligation appears in the Trade and Cooperation Agreement between the European Union, the United Kingdom and Northern Ireland, it could be the case that The CMA will reject the purchase of Activision Blizzard. Rejection that would be fully valid.
And what would happen in this case? Well, there could be several situations. For example, it could happen that the merger went ahead in those territories where it had been authorized, but not in those that had been rejected. Something similar to what has happened to the Veolia-Suez merger process, which was rejected by the CMA.
The fusion of Veolia (French water and waste management group) with Suez (British garbage company) continues to be blocked by the CMA, which has not yet issued a favorable final report. However, it has been authorized worldwide.
Therefore, today, Veolia Suez is operating all over the world, except in the United Kingdom. Something similar to what could end up happening with Microsoft and Activision Blizzard.
Along with this case, we can find other more drastic ones. For example, the CMA blocked the merger of Cargotec (Finnish machinery company) with Konecranes. Finally, in March this year, Cargotec abandoned its merger plan. On the other hand, it would be possible for Microsoft to go to court in case of blocking, as has happened to Facebook and Giphy. And it is that the CMA blocked Facebook/Meta and Giphy mergerbut in this case the project has not been abandoned, because Goal has appealed the decision to the Courts, verifying that the CMA failed to give them information related to the decision it made.
Microsoft Accuses UK Regulator of Filing Same Complaints as Sony Regarding Activision Blizzard Deal
In other words, if the CMA rejects the purchase of Activision Blizzard by Microsoft, the situation could go one of several ways, depending on what Microsoft deemed appropriate. However, in practice, precisely to avoid these situations, it often happens that competition agencies try to reach agreements with solutions that satisfy all parties. And we believe that this will be the situation that finally occurs. What do you think?