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UK regulator provisionally approves Microsoft’s $75bn Activision deal

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UK regulator provisionally approves Microsoft’s $75bn Activision deal

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Microsoft’s proposal to acquire Activision Blizzard took a big step forward on Friday after the UK’s competition regulator provisionally accepted the tech company’s amendments to the $75bn takeover of the Call of Duty developer. 

Last month, the two US-based companies submitted a new proposed merger agreement to the Competition and Markets Authority, aimed at mollifying the watchdog’s concerns that the takeover would harm competition.

The CMA, which blocked the merger in April, has been seen as the last big legal hurdle facing the world’s largest video games deal. Attempts by the US Federal Trade Commission to halt the transaction have failed in court, though the agency is still trying to appeal against the latest decision.

Several other regulators, including the EU, have already cleared the transaction following commitments by Microsoft to license Activision’s catalogue, which includes the blockbuster Call of Duty franchise, to other cloud streaming services.

The centrepiece of the two companies’ revised pitch to the CMA was a deal to sell Activision’s cloud streaming rights to France-based rival Ubisoft. Under that agreement, Microsoft would not be able to release Activision’s games — including World of Warcraft and Diablo — exclusively on its own cloud streaming service Xbox Cloud Gaming, though they would still be available on the platform alongside rivals’.

“In response to our original prohibition, Microsoft has now substantially restructured the deal, taking the necessary steps to address our original concerns,” said Sarah Cardell, chief executive of the CMA.

The CMA said on Friday it had “limited residual concerns” that certain aspects could be circumvented, terminated or not enforced.

“To address these concerns, Microsoft has offered remedies to ensure that the terms of the sale of Activision’s rights to Ubisoft are enforceable by the CMA,” it added. “The CMA has provisionally concluded that this additional protection should resolve those residual concerns.”

Cardell, whose agency has been criticised by some in the industry for its position on the Microsoft deal, also took aim at the software giants on Friday.

“It would have been far better, though, if Microsoft had put forward this restructure during our original investigation,” she said. “This case illustrates the costs, uncertainty and delay that parties can incur if a credible and effective remedy option exists but is not put on the table at the right time.”

She insisted that the CMA’s position “has been consistent throughout”.

Gareth Sutcliffe, games analyst at Enders Analysis, a consultancy, said: “With cloud gaming such a small sector of the overall industry, the [provisional] approval represents a grand compromise for both parties, with the most important components of the deal still intact.”

The CMA’s new consultation will run to October 6, clearing the way for final approval before the companies’ extended deadline to complete the deal on October 18.

Since the CMA’s initial ruling to prevent the deal, Microsoft has struck further licensing deals with rivals — including its main rival, PlayStation parent Sony — for access to Activision’s games, hoping to ease regulators’ concerns.

“We are encouraged by this positive development in the CMA’s review process,” said Brad Smith, Microsoft’s president. “We presented solutions that we believe fully address the CMA’s remaining concerns related to cloud game streaming, and we will continue to work towards earning approval to close prior to the October 18 deadline.”

Activision said the preliminary approval was “great news for our future with Microsoft”.

Sutcliffe said there could be recriminations for Microsoft’s top executives for drawing out the process. “It will be an ongoing question how Brad Smith and Phil Spencer [Microsoft’s gaming chief] read the UK market and regulator so wrong and whether they will be held accountable — it has cost months and hundreds of millions of dollars to get this approval.”

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