Microsoft’s Supplemental Response to the Notice of Possible Remedies

Cloud Gaming Remedy

In response to the Panel's questions, Microsoft has significantly expanded access to the Eligible Games. The proposed remedy is now a royalty-free worldwide license which is generally available to consumers and cloud gaming providers. The streaming right granted to consumers in respect of the Eligible Games is, therefore, "portable" in the sense that it can be used to access the game which the consumer has acquired on any Eligible Streaming Service (or more than one Eligible Streaming Service).

Games Covered by the Proposed Remedy

The remedy will apply to the Activision titles for PC and associated content listed in the updated table below, including all past, current and future releases of such titles available on PC ("Eligible Games"). The list of Eligible Games includes [] Activision PC games [].

~10 Titles List~ Redacted.

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At the Remedies Hearing the CMA asked Microsoft if the 10-year duration is sufficient and whether there would be a "cliff edge" for Sony at the end of this period. The 10- year period is []. Microsoft considers that a period of 10 years is sufficient for Sony, as a leading publisher and console platform, to develop alternatives to CoD.28 The 10- year term will extend into the next console generation []. Moreover, the practical effect of the remedy will go beyond the 10-year period, since games downloaded in the final year of the remedy can continue to be played for the lifetime of that console (and beyond, with backwards compatibility).

2.13 CoD is an entertainment franchise which is already nearly 20 years old. [], Microsoft will need to secure the broadest distribution of the franchise and will be heavily incentivized to keep it on the PlayStation platform []. Microsoft considers that having maintained CoD on PlayStation and grown its player base on Nintendo, GeForce Now and other cloud gaming platforms for a decade, it will have no incentive, or indeed ability, to take CoD exclusive.

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At the Remedies Hearing the CMA asked Microsoft if it would be willing to extend the proposed console licensing remedy to any "credible entrant" in the console market.

2.18 Microsoft does not consider that this is necessary in order to remedy, mitigate or prevent the Console SLC identified in the Provisional Findings, which does not relate to a hypothetical withholding of CoD from potential new entrants. Rather, the Provisional Findings focus specifically on the potential impact of the Merger on Sony. In particular, the Provisional Findings conclude that CoD is an important input for Sony PlayStation. The CMA has not, however, found or presented evidence to suggest that CoD is an important input for console providers generally.

2.19 Nor could the CMA reach such a conclusion, given that CoD is not available on Nintendo – the second largest provider of consoles – today. As the Provisional Findings acknowledge, console platforms offer different technical specifications and differentiated gaming propositions.34 Nintendo's success demonstrates conclusively that a console platform's ability to compete effectively is not dependent on the ability to offer CoD to its customers. Rather, this is possible with a "differentiated offer".35 In any event, Microsoft has already reached an agreement to bring CoD to the Nintendo platform for 10 years as part of its strategy to make CoD as widely available as possible.

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At the Remedies Hearing the CMA asked how the parity framework would allow Microsoft to accommodate advanced, PlayStation-specific features in CoD which are not available on Xbox.

The Parties note, in particular, that there is no basis in the Provisional Findings for what would essentially amount to a "beyond parity" obligation, requiring Microsoft to develop a PlayStation version of CoD which has more features than the Xbox version. Rather, the relevant partial foreclosure mechanisms considered in the Provisional Findings, which the remedy is designed to address, relate to releasing a worse version of CoD titles on PlayStation consoles for example "with fewer features" and "degrading the graphical quality" of the PlayStation version.56

The concern provisionally identified is that Sony would be a "substantially less effective competitor than it would be absent the Merger".57

2.37 As Microsoft will be shipping CoD on PlayStation in compliance with its remedy commitments [], Microsoft will have every incentive to develop games with optimised support for PS5 features, such as haptics, and future consoles in order to maximise sales on the platform.

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2.21 The fact that Microsoft has entered into agreements with Nintendo and NVIDIA in relation to CoD and has made its content (including Game Pass) available on new handheld console devices, such as Steam Deck and Razer Edge, is evidence that Microsoft has a clear incentive to provide CoD to new consoles. The CMA's assessment of incentives in the Provisional Findings cannot be relied upon to conclude that Microsoft would be incentivised to withhold CoD from any such entrant.39 The potential benefits of any hypothetical withholding strategy to Microsoft would be even further reduced if the CMA accepts Microsoft's proposed licensing remedies.40

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At the Remedies Hearing the CMA asked Microsoft whether developing games for future new versions of PlayStation might raise concerns in terms of Microsoft having access to Sony's confidential information.

2.55 As explained at the Remedies Hearing, Microsoft already successfully navigates these confidentiality issues today as a developer for PlayStation, notably in relation to the Minecraft franchise, as well as, post-acquisition of ZeniMax, Sony exclusives Deathloop and Ghostwire: Tokyo.

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Microsoft's lawyers, damn. Basically explained why almost every concern of the CMA was flawed but also provided a solution and often a very generous solution and CMA listened to them for a long time. I really can't see how CMA can justify blocking this. They're bending over backwards with these remedies. Every concern is addressed thoroughly, there is no legal basis to block the deal but I still can't call it, I'm about 50/50.

Royalty-free worldwide licences to the Cloud contracts they recently negotiated. They basically use CMA's own arguments against them when they asked if Microsoft will offer the contracts to new console entries, basically a "well, you never mentioned them before and only spoke about Sony, you even dismissed Nintendo but nevertheless we gave Nintendo a contract"

There's a ton of safeguards, offering to pay the costs of the monitoring and for another agency to do it other than CMA, allowing that monitor to block Microsoft from releasing CoD unless PlayStation has parity but even going as far to develop PlayStation specific features such as haptics. Microsoft pointed out that CMA accepted independent adjudicators in other remedy packages too.

"At the Remedies Hearing the CMA asked Microsoft whether developing games for future new versions of PlayStation might raise concerns in terms of Microsoft having access to Sony's confidential information."

...Microsoft owns Minecraft, CMA...

The Monitoring of Behavioural Remedies.

4. Enforcement

4.1 Microsoft has proposed monitoring and dispute resolution procedures in the Remedies Notice response. At the Remedies Hearing the CMA raised questions on how these would work, in particular in relation to the console licensing remedy. This section provides further detail on Microsoft’s proposal.

(I) Overview of compliance and reporting procedure

4.2 Microsoft proposes a comprehensive compliance and reporting process in order to ensure the remedy remains effective throughout the term. As described, this involves significant steps by Microsoft to ensure self-certification with the undertakings, which can then be verified by an objective, third-party Adjudicator. These also provide for assessment of Microsoft’s compliance with the parity provisions of the remedy by an Objective Third Party Assessor

4.3 Compliance Director. Microsoft will appoint [] to be responsible for monitoring and certifying the company’s ongoing compliance with the undertakings (the “Compliance Director”).

A. The CMA will be informed of the identity of this Compliance Director promptly after the undertakings are implemented and will be notified of any subsequent changes to the individual assuming the role.

B. The Compliance Director will be responsible for preparing an annual report certifying the company’s compliance with the undertakings (the “Compliance Report”).

C. In addition, the Compliance Director will be responsible for, inter alia, monitoring compliance with the terms of the undertakings, facilitating requests for information (e.g., from the CMA, Adjudicator or Objective Third Party Assessor), reporting and rectifying any instances of non-compliance and maintaining staff awareness of the requirements of the undertaking.

This is a standard provision in licensing agreements. For example in Clause [] of the NVIDIA Agreement, []. Remedies Notice response, paragraph 3.4.

As explained further below, the Compliance Report would be provided to the Adjudicator or, alternatively, a monitoring trustee.

4.4 Adjudicator. Microsoft proposes to appoint an Adjudicator to (i) ensure compliance with the parity provisions of the remedy, with the assistance of an Objective Third Party Assessor - see section 4(ii) below; and (ii) resolve any disputes which arise in relation to Microsoft’s compliance with the undertakings – see section 4 (iii) below. The Adjudicator will be appointed at Microsoft’s own expense and will be agreed with the CMA. The Adjudicator will be suitably qualified for the role and will be required to have sufficient expertise of the gaming industry. In the case of any instances of noncompliance, Microsoft agrees to be bound by any directions or requests as may be reasonably required by the Adjudicator. Microsoft notes that an adjudicator role of this nature has been provided for in undertakings accepted by the CMA in previous cases including Bauer Media Group, Macquarie UK Broadcast Ventures / National Grid Wireless Group and Carlton/Granada.

4.5 Microsoft proposes that the Adjudicator would also assume the monitoring trustee functions and be responsible for certifying Microsoft’s compliance with the undertakings to the CMA. However, Microsoft would equally be willing to appoint a standalone monitoring trustee, at Microsoft’s expense.

4.6 Objective Third Party Assessor. Given the technical nature of the parity provisions of the proposed console licensing remedy, Microsoft proposes to also appoint an Objective Third Party Assessor, at Microsoft’s expense, to provide a technical assessment of the parity between the Xbox and PlayStation console versions of each new CoD title prior to its release on any console platform. The Objective Third Party Assessor’s work would be overseen by, and it would report to, the Adjudicator. As explained further in section 4(ii) below, the Adjudicator will take decisions on Microsoft’s compliance with the parity provisions on the basis of reports prepared by the Objective Third Party Assessor.

4.7 The Objective Third Party Assessor would be required to have sufficient expertise in the gaming industry to be able to undertake a technical evaluation of the parity of the PlayStation and Xbox console versions of games. Microsoft notes that assessing the comparative performance of console games is a relatively straightforward task for an experienced gaming engineer, and there are also several organisations which specialise in technical analysis of gaming hardware and software

4.8 Microsoft is considering potential candidates for the Adjudicator and Objective Third Party Assessor roles and can propose a shortlist to the CMA in due course. 

(II) Verification of compliance with parity provisions

4.9 As set out in section 2(iii)(d) above, developing a new CoD game is a transparent process which involves substantive interactions with platforms, including Sony PlayStation, over a period of [] before the game launches. Microsoft envisages that its compliance with the parity provisions of the remedy would be assessed and verified by the Adjudicator – with the assistance of an Objective Third Party Assessor – as part of this process, as follows

A. Microsoft will report to the Objective Third Party Assessor at regular intervals (which will be specified in the undertakings) throughout the game development process on the performance of the Xbox and PlayStation console versions of the game being developed. Copies of these reports will be provided to the Adjudicator.

B. The Objective Third Party Assessor will have the opportunity to raise questions on the reports provided by Microsoft and make recommendations. 

C. Sony will have the opportunity to make submissions to the Objective Third Party Assessor and Adjudicator at any time during the development process. As set out in section 2(iii)(d) above, []

D. Before the launch of each game, Microsoft will submit the full CoD game, in both Xbox and PlayStation console native format, to the Objective Third Party Assessor for certification with the parity requirements (“Full Game Submission”), together with a final report on the parity between the two games. []

E. The Objective Third Party Assessor will then prepare a report on whether there is parity between the Xbox and PlayStation console versions of the game in terms of content, feature, quality and playability (“Parity Report”). The Parity Compliance Report will be provided to the Adjudicator and Microsoft.

F. On the basis of the Parity Report, the Adjudicator will determine whether the parity provisions of the undertakings are complied with (“Parity Decision”). A copy of each Parity Decision will be provided to the CMA.

G. The Parity Decision may impose reasonable conditions which Microsoft must comply with before, or (if the Adjudicator considers it appropriate) as soon as reasonably practicable after, launching the CoD title. In serious cases of noncompliance, the Adjudicator will have the power to delay the release of the CoD title until appropriate steps have been taken to ensure compliance. The Adjudicator will have regard to the impact of any differences between the Xbox and PlayStation versions on the gaming experience for Xbox and PlayStation gamers in determining whether the parity provisions are complied with. Material differences will only be permitted if these are due to material platform limitations on the relevant PlayStation platform or solely caused by Sony.

H. Microsoft will not be permitted to release a new CoD release on the Xbox console platform until the Adjudicator has issued a Parity Decision verifying compliance with the parity provisions (potentially subject to conditions, as noted above).

4.10 The role of the Objective Third Party Assessor and Adjudicator is to ensure that an independent expert has verified parity between the Xbox and PlayStation console versions of CoD in accordance with the undertakings. []. []. As set out in section 2(iii)(d), []

(III) Fast-track dispute resolution mechanism

4.11 In the unlikely event that it will be required, Microsoft proposes to include an effective fast-track dispute resolution mechanism that would be available to SIE Group and any remedy-taker under the cloud licensing remedy (a “Remedy-Taker”).

4.12 In Microsoft’s response to the Remedies Notice, Microsoft proposed that disputes which may arise in relation to Microsoft’s compliance with the undertakings would ultimately be determined by binding arbitration under the Arbitration Rules of the International Chamber of Commerce (in London).

4.13 Having considered further, Microsoft considers that it would be more effective to provide for the appointment of an independent Adjudicator127 to resolve any disputes in accordance with a fast-track dispute resolution mechanism. This would enable disputes to be determined by an Adjudicator with pre-existing knowledge of the undertakings given by Microsoft and the concerns relating to the Merger which they are intended to address, and provide greater assurance that disputes would be determined in a timely manner.

4.14 In summary the fast-track dispute resolution mechanism would operate as follows:

A. Microsoft would offer a dispute resolution mechanism by way of undertaking. Remedy-Takers would be free to decide whether or not to accept, and therefore be bound by, this mechanism. The dispute resolution mechanism would apply to all disputes between Microsoft and a Remedy-Taker regarding the undertakings.

B. Microsoft and the relevant Remedy-Taker would be required to use commercially reasonable efforts to seek to reach a negotiated outcome within a specified period. This would involve Microsoft and the Remedy-Taker seeking to resolve the dispute through cooperation

For the avoidance of doubt this would be the same Adjudicator appointed to verify compliance with the parity provisions.

Microsoft notes that, both for the purposes of international comity and practicality, the dispute resolution mechanism provided for by the undertakings will need to be aligned with any remedies accepted in other jurisdictions

C. Failing that, the Remedy-Taker will have the opportunity to have its concerns dealt with promptly, with the outcome determined by the Adjudicator.

4.15 The proposed Adjudication procedure would operate as follows:

A. The Remedy-Taker would be required to issue an Adjudication Notice briefly setting out: (a) the issues in dispute for which adjudication is required; (b) the material facts and any documentary or other evidence relied upon; and (C) the relief sought. Microsoft will be required to provide a written response to the Adjudication Notice within a specific timeframe.

B. The adjudication process will be conducted in private and remain confidential. The parties will be subject to stringent cooperation procedures with the Adjudicator and agree to be bound by its final decision (including any directions or requests it may reasonably make).

C. The Adjudicator will act fairly and impartially, making use of its specialist knowledge to determine any disputes between the parties.130 It will be required to take into account that the purpose of the remedy is to allay concerns relating to the Merger

D. If a dispute relates to the parity provisions the Adjudicator will take into account any relevant Parity Compliance Report and any other relevant materials that may be provided by the Objective Third Party Assessor as part of the adjudication process.

E. The Adjudicator will be required to issue a decision on the dispute within a specified deadline. The Adjudicator's decision shall be final and binding and a copy of its decision will be given to the CMA.

F. Each party will bear its own costs of the Adjudication Procedure. The costs of the Adjudicator shall be borne by Microsoft.

G. The CMA will be entitled to participate in all stages of the adjudication procedure and may, on request, have access to any materials relevant to the procedure. To the extent the dispute relates to the parity provisions the Adjudicator may also ask the Objective Third Party Assessor to participate.

Before Microsoft responds, the Adjudicator will first confirm if, in its view, the Adjudication Notice is incomplete in any material respect and/or discloses no reasonable grounds for it to act.

In particular, the Adjudicator will: (a) avoid incurring an unnecessary expense; (b) determine the procedure and requirements to be followed by the parties, giving each party a reasonable opportunity in the light of the overall timetable to put its case and deal with that of the other party; (C) determine the dispute based on the written materials submitted by the parties and without an oral hearing; and (e) take into account any submissions that the CMA might choose to provide

^ How the hell can CMA look at that and say "not good enough" Lmfao.

Goddamn Microsoft...

Edit - Cleaned it up a little, worth a read.

Worth the double mention.

I would have loved a special physical collection with both games and all dlc.

edit:will still be a double dip for me

A 10-year term is longer than the previous licensing remedy put in place in Reckitt Benckiser/K-Y brand (2015), which was for a period of eight years and in line with the 10-year terms imposed in Korean Air / Asiana Airlines (2023) and Bauer Media Group. This period is also in line with access commitments accepted by the European Commission in Meta/Kustomer (2022), London Stock Exchange Group/Refinitiv Business (2021), Google/Fitbit (2020) and Telia Company/Bonnier Broadcasting (2019). While Microsoft is prepared to continue to discuss this constructively with the CMA, there is no basis for extending the remedy beyond the period proposed by Microsoft.

This really puts things into perspective and makes CMA look a little ridiculous, GAMING is being treated more seriously than a Health/Hygiene/Nutrition Company, a Multimedia Conglomerate and a frigging Airline, Lmao. They imposed 10 years on the Airline but are asking if 10 years is strong enough for a frigging Gaming company, Lol.

But "Microsoft is prepared to continue to discuss this constructively with the CMA" makes me think they would be open to extending it.

Lots of great responses from Microsoft all round which makes this really hard for CMA to block, I'm increasing in optimism.

In other words no aunties and grannies appointed by a purely political process that are easily influenced by anyone's opinions like the CMA ;) 

So Xbox Series X can still benefits from slight boost in performance and/or resolutions based on the hardware limitation without it being considered a breach of parity. 

Do you know if all of this is conditional to Sony signing the deal with MS or both MS and the CMA are basically side stepping Sony's to ensure the game continue on PS consoles?

Just wait for the article to come out, the same few suspect will inevitably come and tell US how much a victim Sony still remain.

Anyway great read, what an extensive resolution offered by MS, my confidence is once again really high for the deal (70%+) cause I don't see a way to block the deal without acting solely as a Sony lobbied partisan entity which would likely get sever criticism from the CAT were it to go there. 

Bethesda just announced that the preview embargo for Redfall lifts tomorrow at 10am EST!

I'll be eagerly awaiting to hear how the game is shaping up. 

Yeah, the Series X stock levels are quite poor. Xbox definitely needs to step it up. Don't know if they are using their X chips for another Cloud capacity upgrade or saving them for Starfield's launch already, or just not making enough, but regardless of which they need to be making more X units. PS5 is curbstomping them right now in the US, their strongest market, and the situation is even worse outside of the US. I also think it's time for them to do something to help out S's lagging sales, either a price cut or a new bundle that is a good value.