The discussion of what the UK Competition & Market Authority's provisional findings (released yesterday) mean is in full swing, so I'd like to do another short follow-up. Let me give you the context for this particular follow-up:
In my initial reaction I stated my feeling that the UK Competition & Markets Authority (CMA) is being constructive, just in its own way. I noted that the CMA now distinguishes very clearly between areas of no concern (Candy Crush), limited concern (impact on competition in console market), and more significant concern (impact on cloud gaming services). Practically all of the concerns are still on the table, but in a more nuanced fashion. My initial reaction was primarily about the remedies notice, which I think didn't get enough attention by some other people.
After reading the full 277-page report, I followed up with observations on that one. There was so much noise yesterday about the headline of the announcement: "Microsoft - Activision deal could harm gamers" (emphasis added)
Just like that headline, the full report is also replete with "may", "might", and "could" sentences. Let's face it: the legal standard is a balancing of the probabilities. It's not that any deal can be prohibited based on a combination of doomsday scenarios. No matter the topic: if you look at everything that may/might/could happen, and take the worst-case permutation of all of those may/might/could scenarios, you'll eventually arrive at a negative scenario. But that is not the law.
Sometimes the CMA even combines its disclaimers and "provisionally finds" that something "may" happen or be the case. They can easily adjust those positions when they perform a final balancing because "provisional" is not "final" and "may" is not "will". They don't have to admit they were wrong on anything in order to clear the deal based on one or more concessions. I continue to have faith in this process.
On Twitter I explained that the name of the game has two parts:
My perspective is that (a) MSFT and ATVI have to continue their efforts to explain why certain concerns are based on unrealistic doomsday scenarios and (b) above all, show why the proposed access remedies will be effective, reliable, administrable.
— Florian Mueller (@FOSSpatents) February 9, 2023
Then this may/might/could fly.
If we want to understand whether the CMA is being constructive or not, we can't compare the CMA's statements and actions to that of others (or to our idea of what we'd like them to say). We have to look at the CMA's general approach.
A lot of the concerns they raise about different types of remedies (even about potential divestitures, such as that the buyer might do a bad job) are threadbare recitals of their guidelines and may/might/could or may not/might not/could not apply in this case here.
As a Twitter user pointed out in a reply to me, the CMA's remedies notice (PDF) in the Facebook-Giphy case (a merger that got canceled because of the CMA's concerns) did not discuss any particular non-divestiture remedies. Paragraph 13 of that remedies notice said the following:
"Our current view is that a behavioural remedy is very unlikely to be an effective remedy to the SLCs or any resulting adverse effects that we have provisionally identified. However, we will consider any behavioural remedies put forward as part of this consultation."
That second sentence ("will consider") is meaningless because they simply can't refuse to look at a proposal at all. The key thing is that the Facebook-Giphy remedies notice did not discuss specific non-divestiture remedies--unlike the notice in the Microsoft-ActivisionBlizzard case.
The same Twitter user pointed me to a tweet by someone else that I haven't had the time to verify yet, but I did want to share it because it is plausible:
BOMBSHELL: More evidence that the CMA will pass with behavioral remedies https://t.co/AU0HrJrpPw
— Xbox 007 (@ProjectXbox17) February 9, 2023
Out of the last 65 cases that went to phase 2 at the CMA, only one of them, Bauer Media had behavioral remedies suggested
MS/ABK is the 2nd
I wouldn't go so far as to say that the CMA is "suggest[ing]" behavioral remedies here. But the remedies notice provides some guidance as to what concerns have to be addressed. I interpret that as a high--but not insurmountable--hurdle.
In the full report, the CMA states the following about the history of remedies discussions:
"Both Microsoft and [Sony Interactive Entertainment] have provided detailed chronologies to the CMA of the negotiations between Microsoft and SIE, providing their own commentary on why certain aspects of certain offers should or should not have been accepted by the other party."
Thus far, the CMA has simply not taken a position on which of the two companies is right. But that's going to happen now.
I have faith in the CMA making a rational decision in the end. Between now and late April, it's not about what "may/might/could" happen, but they'll have to ask themselves what result a balancing of the probabilities has. At the same time they'll evaluate proposed concessions and Sony's objections. I, for my part, have no doubt that a long-term license agreement can be effective, enforceable, and administrable. That's why I remain optimistic. There are risks involved. The CMA is sending out a clear message to all large technology companies that any significant acquisition they will make is certain to get a rough ride, with regulators focusing on worst-case scenarios rather than facts and developing novel theories, such as that market leaders must be protected from competition...
