CMA makes final prohibition in order in Microsoft-Activision merger and opens a Phase 1 investigation into restructured deal

The CMA has made a final order prohibiting the anticipated acquisition by Microsoft Corporation of Activision Blizzard, Inc.

In April 2023 the CMA concluded on its final report that the acquisition may be expected to result in a substantial lessening of competition in the market for the supply of cloud gaming services in the UK.

The CMA has not been satisfied that any change in circumstances warrants a different conclusion to that reached in its final report.  Accordingly, its 22 August 2023 Order prohibits, except with the prior written consent of the CMA, Microsoft from acquiring an interest (as a means of conferring control) in Activision or any entity holding an interest in Activision for 10 years.  Activision is subject to the same prohibition in relation to Microsoft.

Meanwhile Microsoft and Activision have entered into a new, restructured transaction, under which Microsoft will not acquire cloud streaming rights for existing Activision PC and console games, or for new games released by Activision during the next 15 years (this excludes the EEA.  Instead, the rights will be divested to Ubisoft Entertainment SA (Ubisoft) prior to Microsoft's acquisition of Activision

The CMA has said that the restructured transaction is “substantially different from what was put on the table previously”.

The CMA has opened a new Phase 1 investigation to examine the new deal. The CMA invites comments by 1 September 2023.

The unfolding saga of events in this case is not what many observers expected.  It seems that the revised deal is more of a ‘fix-it-first’ remedy with a prior divestment to a named third party than a revised transaction structure as such.  What matters is whether this will be sufficient to address the concerns raised by the CMA in the final report, principally around vertical foreclosure in cloud streaming services.

 

https://www.gov.uk/government/news/microsoft-submits-new-deal-for-review-after-cma-confirms-original-deal-is-blocked

CMA gives unconditional clearance to Broadcom’s acquisition of VMware

 

The Competition and Markets Authority (CMA) has cleared Broadcom’s acquisition of VMware without remedies.

Broadcom is a US technology company that designs, manufactures and supplies a broad range of hardware and infrastructure software solutions.

VMware supplies virtualisation software that is mainly used either in data centres or in private clouds.

In its in-depth investigation the CMA examined whether the merged entity would be able to harm competing manufacturers of storage adapters and fibre channel switches by reducing interoperability between VMware's virtualisation software and competitors' hardware and switches.

The CMA confirmed its provisional findings that any potential financial gain to Broadcom and VMware of reducing interoperability of rival products would not outweigh the potential financial cost in terms of lost sales.

The European Commission conditionally cleared the transaction in July after Broadcom agreed to commitments allowing competitors access to VMware’s cloud computing software. The transaction has been cleared in Australia, Brazil, Canada, Israel, South Africa and Taiwan.  The US Federal Trade Commission has yet to conclude its own in-depth investigation.

The CMA’s decision may be viewed as a welcome antidote to concerns that its merger review procedure, in the wake of its prohibition decision in Microsoft/Activision, is insufficiently flexible to deal with tech mergers.

https://www.gov.uk/cma-cases/broadcom-slash-vmware-merger-inquiry

No equitable jurisdiction to award compound interest in all fraud cases

 

No equitable jurisdiction to award compound interest in all fraud cases

The Court of Appeal has dismissed an appeal against the strike out of part of a "follow-on" damages claim concerning an infringement of EU competition law in the market for LCD panels. The Court ruled that there is no basis to invoke the equitable jurisdiction to award compound interest.  The ruling is a set-back for LCD cartel claimants – here all in liquidation.

The equitable jurisdiction to award compound interest is not available in every case of fraud. The Court ruled that such jurisdiction is available only where the defendant has retained the claimant's funds and used them for their own benefit.

Moreover, the Court found that even if there was such jurisdiction to expand the scope of damages, it would not be appropriate in this case.  The claimants could recover compound interest at common law post-insolvency, if they could plead and prove loss.  In this case the claimants accepted that they had not suffered such losses, other than being kept out of the damages suffered pre-insolvency.

A five-week trial is scheduled for October 2023.

Granville Technology Group Ltd (in liquidation) and others v LG Display Company Ltd and another [2023] EWCA Civ 980

Competition Appeal Tribunal upholds CMA’s pharmaceuticals excess pricing decision

 

 

Competition Appeal Tribunal upholds CMA’s pharmaceuticals excess pricing decision

The Competition Appeal Tribunal (CAT) has ruled that the CMA was correct in its July 2021 decision finding infringements of the Chapter II prohibition of the Competition Act 1998 by Advance Pharma and its parent companies in relation to the supply of a thyroid drug, liothyronine.

The CMA had that Advanz had abused its dominant position by charging excessive prices for supplying 20mcg liothyronine tablets, between 2009 and 2017. The CMA found that the prices for the packs increased by 1,110% from £20 in 2009 to £248 in 2017.  The CMA imposed total fines of over £100 million, of which Advanz Pharma was liable for over £40 million.

The CAT upheld the CMA’s findings on infringement.  It dismissed all the appellants’ arguments that that the CMA had erred in its assessment using a costs-plus methodology and that the CMA should have used alternative comparators in determining that the prices charged were unfair.

The CAT also concluded that there was no error in the CMA’s assessment that there was no objective justification for the price increases and that the purpose of the pricing was to exploit the lack of regulatory and competitive constraints, resulting in a significant and adverse impact on pricing to the NHS.  The CAT reject the appellants’ submissions that there had been acquiescence by the NHS in the price increases.

The CAT rejected most of the challenges to the CMA’s calculation of penalties but concluded that in this case there was no basis to impose an uplift for deterrence.  It therefore reduced the fine imposed on Hg Capital to £6.2 million and on Cinven to £37.1 million.   Advanz Pharma received no further reduction as its fine was already reduced by the statutory cap.

The judgment is likely to clear the ground for the NHS to seek damages.

Hg Capital LLP, Cinven Capital Management (V) General Management Limited and others and Mercury Pharmaceuticals Limited and others v Competition and Markets Authority [2023] CAT 52