Microsoft sets out grounds for Activision appeal against UK regulator

© Reuters. FILE PHOTO: Microsoft logo is seen on a smartphone placed on displayed Activision Blizzard logo in this illustration taken January 18, 2022. REUTERS/Dado Ruvic/Illustration/

By Sam Tobin

LONDON (Reuters) -Microsoft is challenging Britain's decision to block its $69 billion takeover of "Call of Duty" maker Activision Blizzard (NASDAQ:ATVI) on the grounds of "fundamental errors" in the assessment of Microsoft (NASDAQ:MSFT)'s cloud gaming services.

Britain's anti-trust regulator, the Competition and Markets Authority (CMA), vetoed the deal in April, saying it could hurt competition in the nascent cloud gaming market, sparking a furious row.

Microsoft confirmed on Wednesday it had filed an appeal against the ruling to Britain's Competition Appeal Tribunal (CAT), and a summary of its arguments was published on Friday.

It said the CMA's conclusion that the deal would lead to a substantial lessening of competition in the United Kingdom's cloud gaming market was wrong, according to the summary.

The CMA "made fundamental errors in its calculation and assessment of market share data for cloud gaming services by failing to take account of constraints from native gaming (whereby gamers access games installed on their devices through a digital download or physical disc)", Microsoft will say at the Competition Appeal Tribunal. I

Setting out five grounds for appeal in total, it also said it would challenge the CMA's understanding of the cloud gaming market and the impact of the deal.

Rima Alaily, Microsoft Corporate Vice President and Deputy General Counsel, said the CMA's decision was "flawed for multiple reasons, including its overestimation of the role of cloud streaming in the gaming market and our position in it, as well as its unwillingness to consider solutions that received overwhelming industry and public support".

"We are confident in the strength of our appeal and the binding commitments we have made to increase competition and choice for players today and in the future."

Appeals against CMA rulings are heard by the Competition Appeals Tribunal, which makes a judgment on the merits of the decision, and it is not an opportunity for Microsoft to submit new remedies.

The EU's competition authorities approved the deal earlier this month after they accepted remedies put forward by Microsoft that were broadly comparable to those it proposed in the UK.

Microsoft has also appealed the U.S. Federal Trade Commission's action seeking to block the deal on the grounds that, the agency said, it would suppress competition.

The CMA reiterated its position on Friday, with a spokesperson saying: "We prohibited this deal as we had concerns that it would reduce innovation and choice in the cloud gaming market in the UK. We will defend our position in court."