Enlarge / A small selection of the characters that would be part of Microsoft if its proposed Activision/Blizzard merger is allowed to go through. (credit: Activision Blizzard King)

Activision isn't pulling any punches in its fight against the UK's regulatory attempts to block its merger with Microsoft . In a "motion to intervene" recently filed with the Competition Appeal Tribunal (and recently summarized on the tribunal's website ), Activision excoriates the UK's Competition and Markets Authority for a "flawed conclusion" that was variously "unlawful, irrational, and/or disproportionate" and "arrived at in a procedurally unfair manner."

The appeal takes particular issue with the CMA's focus on cloud gaming in a vacuum, without taking into account competition from "native gaming" via games running on local hardware. The ability to easily switch from one type of game experience to the other means that cloud gaming should not be a "separate product market," Activision argues.

A source close to Activision's appeals process (who asked for anonymity to speak frankly about the appeal) put a finer point on this argument, saying that cloud gaming is a niche technology and that "most consumers continue to get games by download or physical disc because running the game on their local hardware gives them a much better experience."

Enlarge / Is the Microsoft/Activision deal still "pining for the fjords"? Or has it "ceased to be"? (If you don't get this reference, what is is like to be young?) (credit: Python (Monty) Pictures | BBC)

Wednesday's decision by the UK's Competition and Markets Authority (CMA) to block Microsoft's purchase of Activision may seem to be a fatal blow for the $69 billion deal. But Microsoft and Activision say they still see a path forward for their proposed merger, even if it's now a longer road than anticipated.

An unappealing appeals process

Bloomberg reports that in an all-hands meeting for the gaming division Thursday, Xbox chief Phil Spencer said Microsoft's interest in the deal "hasn't wavered" in the wake of the UK's decision. Spencer reportedly still sees a way forward for the deal despite acknowledging that the UK decision will "slow the approval process."

Though the Competition and Markets Authority's (CMA) release was the regulator's final report on the proposed merger, that doesn't necessarily represent the UK government's absolute final say on the deal. The CMA decision can be appealed to the UK's Competition Appeal Tribunal (CAT), and both Microsoft and Activision instantly signaled their intent to do so in statements following the report's release on Wednesday.

Enlarge / Despite Microsoft's assurances, the CMA worries that making Call of Duty an exclusive would be in the company's financial interests. (credit: Getty Images | Bloomberg)

The UK's Competition and Markets Authority (CMA) came down squarely against Microsoft's proposed $69 billion acquisition of Activision Wednesday morning . In a sprawling provisional report summary , the government regulator said the merger could hurt consumers by "weakening the important rivalry between Xbox and PlayStation gaming consoles" and "could result in higher prices, fewer choices, or less innovation for UK gamers."

The CMA's provisional findings focus on cloud gaming, where the CMA says Microsoft already accounts for 60 to 70 percent of the global market. After the merger, Microsoft would "find it commercially beneficial to make Activision’s games exclusive to its own cloud gaming service (or only available on other services under materially worse conditions)," the CMA said.

The CMA also expressed particular worry about "a small number of key games, including Call of Duty " being potentially locked to the Xbox and Windows PCs. While Microsoft has repeatedly promised that Call of Duty would remain fully available on other platforms for at least 10 years after the merger, the CMA notes that Microsoft has previously purchased other game studios and then "[made] their content exclusive to Microsoft’s platforms."

Enlarge / A small selection of the characters that would be part of Microsoft if its proposed Activision/Blizzard merger is allowed to go through.

Microsoft's legal team now expects Britain's Competition and Markets Authority to formally oppose its long-planned $69 billion merger with Activision Blizzard. That's according to "four people briefed on the matter" cited many paragraphs deep in a New York Times report about the direction of globalized antitrust regulation.

Microsoft expects the European Union's separate "in-depth" investigation into the deal to be more amenable to "potential remedies" that would allow it to go forward, according to the Times' report. As those processes play out on the other side of the Atlantic, the US Federal Trade Commission for now seems content to limit its response to an administrative lawsuit rather than issuing an emergency injunction that could have stopped the deal from moving forward .

Representatives from Microsoft and Activision have yet to offer any public comment in response to a request from Ars Technica.

Enlarge / Just a few of the Activision franchises that will become Microsoft properties if and when the acquisition is finalized. (credit: Microsoft / Activision)

The Federal Trade Commission will "likely" move to file an antitrust lawsuit against Microsoft and Activision Blizzard to block the companies' planned $69 billion merger deal . That's according to a new Politico report citing "three [unnamed] people with knowledge of the matter."

While Politico writes that a lawsuit is still "not guaranteed," it adds that FTC staffers "are skeptical of the companies' arguments" that the deal will not be anticompetitive. The sources also confirmed that "much of the heavy lifting is complete" in the commission's investigation, and that a suit could be filed as early as next month.

Sony, the main opponent of Microsoft's proposed purchase, has argued publicly that an existing contractual three-year guarantee to keep Activision's best-selling Call of Duty franchise on PlayStation is "inadequate on many levels." In response, Microsoft Head of Xbox Phil Spencer has publicly promised to continue shipping Call of Duty games on PlayStation "as long as there's a PlayStation out there to ship to." It's not clear if the companies have memorialized that offer as a legal agreement, though; The New York Times reported this week that Microsoft had offered a "10-year deal to keep Call of Duty on PlayStation."

Enlarge / Taking a close look... (credit: Aurich Lawson / Ars Technica )

The European Commission today said its preliminary investigation of Microsoft's proposed $69 billion purchase of Activision Blizzard "may significantly reduce competition on the markets for the distribution of console and PC video games." As such, the government group is now opening what it calls an "in-depth investigation" of the proposed merger, which it says will be completed by March 23, 2023.

"We must ensure that opportunities remain for future and existing distributors of PC and console video games, as well as for rival suppliers of PC operating systems," European Union Competition Commissioner Margrethe Vestager said in a statement. "The point is to ensure that the gaming ecosystem remains vibrant to the benefit of users in a sector that is evolving at a fast pace. Our in-depth investigation will assess how the deal affects the gaming supply chain."

Specific concerns

In announcing the new investigation, the Commission says that it is worried "in particular" that the merger will "foreclose access" to "high-profile and highly successful games... such as Call of Duty " on non-Microsoft platforms. In response to such concerns, Microsoft recently promised that it would ensure Call of Duty remained on PlayStation platforms "as long as there is a PlayStation."