UK regulators have cleared Microsoft's $69 billion acquisition of Activision Blizzard, the company behind Call of Duty, Overwatch, and World of Warcraft, reversing its earlier decision to block the deal, which is one of the largest tech transactions in history.
The Competition and Markets Authority (CMA) had originally blocked the deal over concerns Microsoft would gain too much control of the cloud gaming market.
But in August, Microsoft agreed to transfer the rights to stream Activision games from the cloud to French gaming company Ubisoft Entertainment for 15 years outside the European Economic Area.
That was enough to placate concerns at the CMA, which then signalled it was prepared to clear the deal.
'No way to engage with the CMA'
“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,” Sarah Cardell, chief executive of the CMA, said on Friday.
“As cloud gaming grows, this intervention will ensure people get more competitive prices, better services and more choice.”
Ms Cardell also said that the way Microsoft had behaved during the process was less than ideal and 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.”
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said while that “slap on the wrist isn’t ideal, it won’t stop Microsoft from pushing forwards into this exciting, and very lucrative, new chapter”.
Now that the deal has been officially cleared by the CMA, Microsoft will avoid paying Activision the $4.5 billion penalty it might have incurred if the sale had fallen through.
Microsoft president Brad Smith said the company was grateful for the “thorough review and decision”.
“We have now crossed the final regulatory hurdle to close this acquisition, which we believe will benefit players and the gaming industry worldwide,” he said.
Activision chief executive Bobby Kotick also welcomed the news: “We look forward to becoming part of the Xbox Team.”
Rivals' worries
The deal was first announced in January 2022, and it was cleared by competition and anti-trust regulators in more than 40 countries.
The 27-country European Union gave the deal the green light, but there was resistance in the UK and the US.
British and American regulators worried it would stifle competition in the video game industry, and Microsoft rival Sony feared it would limit PlayStation gamers’ access to Call of Duty, Activision’s long-running military shooter series.
The US Federal Trade Commission (FTC) lost a court attempt to pause the deal so that its in-house judge could review it.
However, the FTC has not given up. It appealed against the decision and last month filed notice of its plan to resume that trial, meaning that the regulator still intends to challenge the deal, even after it is closed.
Analysts feel while the deal is unlikely to be derailed by the FTC, some small tweaks may be needed in the future, depending on the legal outcome.
The deal is a game-changer in the industry, and market watchers say Sony worries that future blockbuster games might only be available on Microsoft's Xbox.
The statistics website Statista projects that the video gaming industry will earn revenues of $334 billion this year and that by 2027 there will be 3.1 billion gamers worldwide.
