MS and ABK Quickly Dismissed the Option of Divestment, Although the Cma Was Interested in Assessing It in More Detail ( 339 - 340)
Some third parties told us that a partial divestiture option had the potential to be effective.
Other third parties told us that partial divestiture would involve effectiveness risks relating to scope and composition of the divestiture package, availability of a suitable purchaser, shared intellectual property (IP) assets and other development resources. One third party told us that it could not see how partial divestiture could be better for competition and for gamers than the Merger completing. SIE told us that a partial divestiture remedy would be effective if the divested entity was able to compete viably, on a standalone basis, and without the support of those parts of Activision's business that remain with Microsoft (eg the King business).
However, Microsoft told us that any partial divestiture scenario would be [REDACTED]. Activision acknowledged Microsoft's position on partial divestiture, noting its understanding that [REDACTED].
Given our initial risk assessment, we consider that substantial additional evidence would be required from the Parties to enable us to assess whether the divestiture of part of Activision would, in practice, represent an effective remedy. We explained to the Parties that, without additional evidence from them, we would be unlikely to be able to conclude whether a partial divestiture is an effective remedy.
MS Accused Again the Cma to Rely on Evidence From a Third Party That Refused to Hold Any Discussions With Them (Sony, I Guess) (Page 348)
In its response to our Remedies Working Paper, in relation to the CMA's broader concern that, under the Microsoft Cloud Remedy, there may be a variety of ways in which user experience might worsen on competing platforms even with some form of licensing remedy in place, Microsoft told us that there was no basis for this concern as the titles which would be available for streaming would be the same which are available to purchase from the Microsoft Game Store or another Authorised Game Store on a royalty-free basis. Moreover, it told us that Microsoft was offering streaming rights in relation to titles irrespective of whether Microsoft itself decides to stream the titles. It added that the CMA relied on evidence from one third party ([REDACTED]) that had consistently refused to hold any discussions with Microsoft in order to address its concerns, and noted that the concerns raised have been rejected by the CMA in relation to console gaming. It told us that the Provisional Findings also presented no evidence to suggest that partial foreclosure of Activision content could foreclose cloud gaming rivals.
According to MS, the Cloud Remedy Wasn’t Limited to b2p and Byog (Page 349)
Microsoft submitted that the Microsoft Cloud Remedy is not limited in scope to BYOG and B2P. It told us that the definition of Streaming Service includes all business models, including MGS. It submitted that it is sufficient that MGS is treated in the same way as other potential business models and submitted its view that we have presented no evidence to suggest that Activision would have contemplated placing its content on a MGS cloud gaming service. It submitted that we have not found Activision content to be an important input for MGS. Microsoft submitted that the evidence is limited to CoD and that WoW is only 'notable'. It told us that the fact that future games may have been placed on cloud services in the future does not mean that they would be an important input. Microsoft submitted that the Provisional Findings are consistent with MGS growing without access to Activision titles and that the CMA ruled out the concept of Activision content playing a role in the growth of cloud gaming MGS. On this basis, Microsoft submitted that this cannot be seen as a distortion. Further, Microsoft submitted that it would be disproportionate and unnecessary for the scope of the remedy to include a commitment to make Eligible Games available via MGS in order to address the SLC identified by the CMA.
The Cloud Remedy Does Not Cover Non-windows OS, According to the Cma (Page 364)
The Microsoft Cloud Remedy applies only to the PC and console versions of a defined list of games (the Eligible Games). The PC versions are those which are developed to run on a Windows OS.
This means that any cloud gaming service wishing to stream these games would have to use, or be compatible with, the Windows OS version of those games. This would exclude or restrict providers that may wish to provide cloud gaming services using other OSs, either now or in the future. This could exclude, for example, Apple, which has its own proprietary OS, as well as Linux OS-based cloud gaming services and potential new entrants using a different OS. We have found that Microsoft would have the ability and incentive to foreclose rival cloud gaming service providers post-Merger.
This means that cloud gaming services using other OSs would either need to switch to Windows (and incur Windows licensing fees, which we found to be a high proportion of overall costs for cloud gaming providers) or seek to adapt the Windows version of the game to run on their alternative OS (eg through the use of a compatibility layer such as Proton, which we have already found is not sufficiently effective to overcome Microsoft's advantage through Windows). This has the potential to make it significantly more difficult for such providers to enter, grow and compete against Microsoft.
In response to these concerns, Microsoft told us that it would grant streaming rights for MacOS and other PC OS versions of the Eligible Games 'as may be released during the term of the Microsoft Cloud Remedy'. It noted that Activision had previously released MacOS versions of a small number of games.
While this commitment brings non-Windows PC versions within the scope of the Microsoft Cloud Remedy, it only covers games for which Microsoft chooses to make alternative versions. In the absence of the Merger, Activision would seek to maximise the value that it was able to derive from these games, which would have involved consideration of making nonWindows PC versions of its games (as it already has done in some cases). In our view, it is likely that Activision would continue to develop non-Windows PC versions of at least some of its games absent the Merger, and the incentives to do so would increase if demand for cloud gaming services that use PC operating systems other than Windows were to grow.
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