On Friday, the leading regulatory authority for competition in the United Kingdom granted its approval for Microsoft’s proposed acquisition of Gaming company Activision Blizzard for $69 billion, marking the last significant obstacle to the deal’s completion. The Competition and Markets Authority (CMA) confirmed that Microsoft’s purchase of Activision had been cleared, with the exception of Cloud Gaming rights.

In its statement on Friday, the CMA stated, “The new deal will stop Microsoft from locking up competition in cloud gaming as this market takes off, preserving competitive prices and services for UK cloud gaming customers. It will allow Ubisoft to offer Activision’s content under any business model, including through multigame subscription services.”

CMA’s Approval of Microsoft’s Activision Acquisition

The CMA represented the final regulatory body delaying the acquisition, and Microsoft is now expected to conclude the transaction.

This decision represents a significant reversal by the CMA, which had been a staunch critic of the acquisition and had effectively blocked it earlier this year due to concerns about potential anti-competitive effects in the emerging cloud gaming market.

Microsoft first proposed the acquisition of Activision in January 2022, but it faces regulatory challenges in the United States, Europe, and the United Kingdom.

In July, the CMA expressed its willingness to reconsider Microsoft’s acquisition proposal if certain changes were made to address its concerns. Microsoft responded with a series of concessions, primarily involving the transfer of cloud gaming rights for Activision’s games to the French game publisher Ubisoft Entertainment.

According to the CMA, this restructuring will allow Ubisoft to offer Activision’s content through various business models, including multi-game subscription services.

Additionally, it will facilitate cloud gaming providers’ use of non-Windows operating systems for Activision content, ultimately reducing costs and improving efficiency.

The U.K.’s Regulatory U-turn

Global regulators held concerns that the acquisition could diminish competition within the gaming sector, particularly within the realm of cloud gaming. Officials were apprehensive that Microsoft might potentially take prized Activision titles such as Call of Duty and establish exclusivity for Xbox and other Microsoft platforms.

Cloud gaming is widely perceived as the forthcoming frontier in the industry, offering subscription services that enable users to stream games much like they stream movies or television shows on platforms like Netflix. This innovation has the potential to eliminate the need for costly gaming consoles, as users can enjoy games on their PCs, mobile devices, and televisions instead.

In particular, the U.K. regulator’s contention when it initially blocked the acquisition in April was that permitting the deal to proceed would grant Microsoft a dominant position in the emerging cloud gaming market.

The European Union authorities were the initial major regulatory body to grant approval for the deal in May after Microsoft made concessions to address the EU’s concerns.

During that period, the CMA reaffirmed its initial decision to oppose the deal, arguing that the concessions offered to the EU would grant Microsoft the ability to “dictate the terms and conditions of this market for the next ten years.”

Concurrently, in the United States, the Federal Trade Commission engaged in a legal battle with Microsoft in an attempt to block the Activision takeover. However, in July, a judge thwarted the FTC’s efforts, paving the way for the deal to proceed in the U.S.

Shortly thereafter, the CMA announced its willingness to review any proposals from Microsoft aimed at restructuring the transaction and addressing the regulator’s concerns.

Microsoft’s compromises for the UK

In August, Microsoft made compromises to the CMA in its second attempt to secure approval for the deal.

As part of the revised agreement, Microsoft will hold back from acquiring cloud rights for existing Activision PC and console games, as well as for any new games released by Activision over the next 15 years. Instead, these rights will be transferred to Ubisoft Entertainment before Microsoft’s acquisition of Activision, as outlined by the CMA.

Sarah Cardell, the CEO of the CMA, stated in a statement, “With the sale of Activision’s cloud streaming rights to Ubisoft, we’ve made sure Microsoft can’t have a stranglehold over this important and rapidly developing market. As cloud gaming grows, this intervention will ensure people get more competitive prices, better services and more choice. We are the only competition agency globally to have delivered this outcome.”

Despite the U.K.’s approval of the deal, the CMA, which has been adopting a more assertive approach in scrutinizing significant mergers, delivered a final critique of Microsoft’s negotiation methods.

Sarah Cardell expressed, “But businesses and their advisors should be in no doubt that the tactics employed by Microsoft are no way to engage with the CMA. Microsoft had the chance to restructure during our initial investigation but instead continued to insist on a package of measures that we told them simply wouldn’t work. Dragging out proceedings in this way only wastes time and money.”

Final Regulatory Challenge

The CMA represented the final significant regulatory obstacle for the Activision acquisition.

Microsoft, President Brad Smith expressed his gratitude for the CMA’s assessment and conclusion on X, previously known as Twitter, stating, “We have successfully cleared the last regulatory obstacle and can now proceed with the finalization of this acquisition, which we anticipate will be advantageous for gamers and the global gaming sector.”

Bobby Kotick, the CEO of Activision Blizzard, conveyed his enthusiasm for the forthcoming collaboration with Microsoft and the abundant possibilities it offers to both employees and players in an email.

Throughout the regulatory scrutiny, Microsoft had been trying to show regulators and its closest competitors that it will not make games exclusive.

The U.S. tech giant signed a deal in February to bring Xbox games to Nvidia’s cloud gaming service and struck a 10-year deal to bring Call of Duty to Nintendo players on the same day as Xbox, “with full feature and content parity.” Microsoft also signed a deal in July with its biggest rival Sony to bring Call of Duty to the Japanese firm’s PlayStation gaming console.

The company has until October 18 to close the deal.

Microsoft Closes Acquisition of Activision Blizzard

Microsoft has closed its acquisition of video game publisher Activision Blizzard, according to a regulatory filing by the company on Friday. It’s Microsoft’s largest deal in its 48-year history and comes after the company quelled concerns about competition from U.K. and European regulators and gained a favorable ruling from a U.S. district judge.

The U.K.’s Competition and Markets Authority gave its nod to the deal earlier on Friday, clearing the way for the close.

The deal gives Microsoft a hefty portfolio of video game franchises, including Call of Duty, Crash Bandicoot, Diablo, Overwatch, StarCraft, Tony Hawk Pro Skater and Warcraft. The game developer generated $7.5 billion in revenue in its latest fiscal year, a small fraction of the $212 billion in sales reeled in by Microsoft.

“Today we start the work to bring beloved Activision, Blizzard, and King franchises to Game Pass and other platforms,” Microsoft Gaming CEO Phil Spencer said in a blog post. “We’ll share more about when you can expect to play in the coming months.”

Conclusion

The CMA’s approval was the final step for Microsoft’s purchase of Activision. The CMA initially had concerns, but Microsoft addressed them. Although the UK approved the deal, the CMA criticized Microsoft’s negotiation tactics. The interference focuses on preventing Microsoft from having too much control in the growing cloud gaming market. Microsoft’s agreements with other companies showed it wouldn’t make games exclusive. The deal is expected to be good for gamers and the industry.

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