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Britain’s competition watchdog has approved Microsoft’s $75 billion acquisition of Activision Blizzard, paving the way for the company to close after a 21-month legal dispute.
The Competition and Markets Authority on Friday gave final approval to a revised deal for Microsoft to license cloud streaming rights outside the European Economic Area to Activision’s past and future catalog, including titles such as call of DutyFrench game publisher Ubisoft.
Sarah Cardell, chief executive of the CMA, said: “We have sent a clear message to Microsoft that unless they fully address our concerns and stand by our position, the deal will be blocked.”
“By selling Activision Blizzard’s cloud streaming rights to Ubisoft, we ensure that Microsoft cannot control this important and rapidly growing market,” she added. “We are the only competitive agency in the world to achieve this result.”
Friday’s approval marks a victory for Microsoft executive Brad Smith, who led the company’s legal campaign to defend the deal that was canceled by many investors and analysts earlier this year.
“We thank the CMA for its thorough review and decision today,” Smith said. “We have now overcome the final regulatory hurdles and completed this acquisition, which we believe will benefit players and the gaming industry around the world.”
The deal with Ubisoft forces Microsoft to relinquish control of Activision’s blockbuster franchises in the cloud gaming market and prevents them from becoming the exclusive operator of its Xbox cloud gaming service, which the CMA believes will solidify the company’s dominance in emerging markets status.
The concession makes the CMA the only global regulator to make major structural changes to the games industry’s biggest-ever deal. However, the lengthy process has led many to question the British agency’s approach and triggered widespread criticism of Khadr from business leaders, dealmakers and legal advisers.
On Friday, Caddell warned that “companies and their advisers should have no doubt that the tactics adopted by Microsoft simply do not engage with the CMA”.
“Microsoft had the opportunity to reorganize during our initial investigation, but we continued to insist on a package of measures that we told them simply wouldn’t work,” she said. “Delaying the proceedings in this manner will only waste time and money.”
British regulators initially ruled in February 2023 that the deal hindered competition in the console market after Sony, whose PlayStation is the market leader, publicly opposed the merger. But just a month later, after reviewing what it called “new evidence”, the CMA surprised many legal observers by changing its position.
The CMA said in March that a response to its interim findings showed Microsoft had no financial motive call of Duty It’s exclusive to Xbox consoles, which analysts estimate outsell PlayStation nearly two to one.
However, Microsoft’s hopes that the agency’s shift would clear the path to approval were quickly dashed. The CMA blocked the deal in April, citing concerns about the impact on cloud gaming. The companies appealed to the UK Competition Tribunal and hired top barristers to present their cases.
The CMA’s stance is at odds with the European Union, which approved the deal in May after Microsoft made concessions to ensure that Activision Blizzard’s games would not be available exclusively on its own cloud streaming service for 10 years.
July brought a turning point for the company. Microsoft has defeated the Federal Trade Commission’s attempt to block its shutdown in a U.S. court, defeating a legal challenge led by the agency’s chairwoman, Lina Khan. Hours after the U.S. ruling, the CMA – then largely alone among global regulators opposed to the deal – said it had agreed with the companies to postpone their appeal while it considered restructuring the deal.
Within days, Sony called a truce with Microsoft, agreeing to a new licensing deal to keep call of Duty on the merged PlayStation.
Microsoft submitted a revised deal to the CMA in August, under which Activision Blizzard’s cloud gaming rights would be sold to Ubisoft before the deal was completed. Ubisoft will then be able to offer the games on its own streaming service, while also licensing them to other cloud providers, including Microsoft. Commercial terms of the agreement were not disclosed.
The CMA provisionally approved the deal earlier this month and held a brief consultation before approving the deal on Friday. The Federal Trade Commission is still challenging the deal in its own internal courts and may seek to undo the merger after it closes.
Activision said: “Formal approval from the CMA is great news for our future with Microsoft, and we look forward to being a part of the Xbox team.”
Despite the FTC lawsuit, Microsoft and Activision Blizzard are expected to close the deal first announced in January 2022 in the coming days and meet the final deadline of October 18.
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