Britain's Competition and Markets Authority CMA on Wednesday blocked Microsoft's $69 billion acquisition of 'Call of Duty' maker Activision Blizzard over concerns it would hinder cloud gaming.
The decision was a shock after the regulatory agency had already resolved its concerns about the consoles market, a sector dominated by Sony's PlayStation and Microsoft's Xbox, which dwarfs cloud gaming.
It is not necessarily, but doesn't always happen. Microsoft said it remained fully committed and would appeal.
The decision by the government to recommend a ban on tobacco products reflected a flawed understanding of the market.
Microsoft can appeal to Britain's Competition Appeal Tribunal CAT, an independent judicial body, that will only examine the CMA's decision-making process, not the merits of the merger.
Microsoft will not be able to offer new remedies at this stage, such as offering to keep Activision content off its Xbox Game Pass, a subscription service for Xbox users in Britain, according to some analysts.
The CAT will not engage with the merits of the CMA's decision or conduct a wholesale review of the parties' evidence, said Edward Lane, senior associate at law firm Harbottle Lewis.
Microsoft has until 24 May to appeal and a decision may take several months.
The CAT will aim to deal with'straightforward' cases within nine months, he said, and Microsoft Activision is anything but straightforward.
The Tribunal will review the case and return it to the Federal Court of Appeals for further review. The likelihood is that, without a material change in circumstances or new evidence, the CMA is most likely to reach the same conclusions as it did first time around, said James Groves, a competition associate at the European law firm Fieldfisher.
European regulators will rule on the world's biggest gaming deal by May 22. Microsoft has said it is fighting the federal trade commission's complaint to block the deal.
If either block the deal, Lane said, it could be game over.
If the EU goes against Microsoft, Microsoft would be fighting an ever-increasing battle and could choose to reduce its losses, even if that means paying Activision a substantial $3 billion break fee.
Facebook-owned Meta appealed a 2021 decision by the CMA to block Giphy, seen as a test case for the British regulator's resolve to take on Big Tech Meta, on a single procedural ground, with the decision otherwise upheld. The CMA had considered new submissions, but it came to the same view, and Meta had to sell animated images platform Giphy.
FNZ, a global financial services company, appealed a court's decision to block a proposed 2019 merger with rival GBST. The government then identified certain potential mistakes in its investigation chaired by Martin Coleman, who also oversaw the Microsoft-Activision case.
The CAT sent the case back to its review, and the CMA agreed to accept a new remedy, whereby FNZ could sell GBST and then buy parts of it back.