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Per this story from the BBC or Bloomberg

The UK Competition and Markets Authority has apparently decided to block the merger of Microsoft and Activision Blizzard. The story notes: "To go through, the deal has to be approved by regulatory bodies in the UK, United States and European Union."

From Wikipedia:

"Activision Blizzard, Inc. is an American video game holding company based in Santa Monica, California."

"Microsoft Corporation is an American multinational technology corporation headquartered in Redmond, Washington."

Both noted as "American" and both noted as being based out of American states, rather than registered abroad.

Question: If both companies are American and based in American locations, then why does the UK or the EU have any ability to block such a merger?

I could see saying "those companies are no longer allowed to sell their combined products in those locations", which might be equivalent, yet not blocking the actual merger itself.

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    They do business in the UK.
    – gnasher729
    Apr 26, 2023 at 19:07

3 Answers 3

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The basis is set out in the Final Report of the Microsoft / Activision Blizzard Merger Inquiry, in particular Chapters 1 (p24) and 3 (p35-36). The role and powers of the Competition and Markets Authority are set out in the Enterprise Act 2002, as amended in 2013 when it replaced the Competition Commission (with predecessor bodies going back to 1949).

The overall procedure is pretty complex, but the main point is that a CMA investigation will happen whenever there is a "relevant merger situation", and the result of that may be an order telling the companies what to do. It could stop them from merging, or impose various conditions about the conduct of business - see Schedule 8 for a long list of possibilities. Their jurisdiction over this anticipated "relevant merger situation" is on the basis that

  1. The two enterprises, namely Microsoft and Activision Blizzard, would cease to be distinct enterprises (s.23(1)(a)) because they would be brought under common ownership or control (s.26).
  2. The acquired company, Activision Blizzard, has a UK turnover of more than £70m (s.23(1)(b)), in fact £716m in FY2021.

The report dedicates some words in Chapter 3 to proving that Microsoft and Activision are both businesses, just in case anybody was in doubt about that.

In essence, the CMA has these powers because a lot of people in the UK play World of Warcraft (etc.) and there could be a "substantial lessening of competition" in the console gaming market as a result of the acquisition. If Activision had fewer UK customers then the £70m threshold would not be reached.

While the investigation overall is addressed to "Microsoft" and "Activision Blizzard" without analyzing the precise structure of the enterprises, any final order from the CMA would be addressed to more specific entities - perhaps Microsoft Ltd. in the UK as well as its American parent, among others. In other cases, orders have been similarly directed to various non-UK companies as well as domestic ones. But the CMA does not require a company to be UK-registered in order to exercise power over it. The relevant statutory condition is about how the enterprise (of whatever kind, wherever incorporated, however structured) does business in the UK.

Other countries' equivalent bodies do basically the same thing, and can similarly impose conditions on foreign companies.

The structure and safeguards in the law mean that the CMA cannot act totally capriciously, or impose conditions that go beyond the scope of its remit (competition in the UK market). So even though Schedule 8 seems very broad on its face, it actually is more limited.

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  • Thank you for the thorough reply. I've marked it as accepted as it includes portions such as the Final Report from Jen's reply, as well detailed discussion of the results in somewhat "layman's" or understandable terminology. Thank you also to Dale and Jen for their replies.
    – G. Putnam
    Apr 27, 2023 at 16:18
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They do business in the UK

That makes them subject to UK law.

If they withdrew from that market, then they would no longer be subject to UK law. However, the business that each does in the UK is likely several orders of magnitude more profitable than the merger is likely to be, so they won’t.

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The Final Report of the Competition & Markets Authority explains the effectiveness of a merger prohibition remedy.

It explains that the prohibition "would be effected by accepting undertakings under section 82 of the Act or making an order under section 84 of the Act."

It also explains the "jurisdiction test": "whether the Merger has sufficient connection with the UK on a turnover or share of supply basis to give the CMA jurisdiction to investigate."

There are various enforcement actions available under the Enterprise Act, including rights of action given to anyone affected by a contravention of a prohibition order or undertaking (s. 94).

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