UK regulator clears way for Microsoft’s acquisition of Activision

The UK’s Competition and Markets Authority (CMA) has officially approved Microsoft’s $69 billion acquisition of gaming studio Activision Blizzard, clearing the way for the deal to be finalized.

The UK’s competition regulator originally blocked the deal but reversed its decision late last month after Microsoft submitted a restructured transaction for the CMA to review.

The remedies put forward by Microsoft included relinquishing control of cloud gaming rights for Activision’s content, removing its ability to limit access to Activision’s key content, or withholding those games from rivals. Furthermore, Microsoft proposed it will not purchase the cloud gaming rights held by Activision, which will instead be sold to an independent third party, Ubisoft, before the deal is completed.

“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,” said Sarah Cardell, CEO of the CMA, in comments posted alongside the announcement. “As cloud gaming grows, this intervention will ensure people get more competitive prices, better services, and more choices. We are the only competition agency globally to have delivered this outcome.”

The acquisition agreement with Activision Blizzard was due to expire on October 18. If the deal had failed to clear its regulatory hurdles, Microsoft would have faced a termination bill of up to $3 billion, due to a clause in the agreement that requires the payment be made if the termination is caused by an “injunction arising from Antitrust Laws.”

CMA issues warning to businesses

In the wake of the CMA’s original decision being described as “bad for Britain” by Microsoft Vice Chair and President Brad Smith, Cardell sought to chastise Microsoft in her comments, adding 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,” Cardell said, adding that any decisions made by the CMA are free from political influence and won’t be swayed by corporate lobbying. 

“We’re grateful for the CMA’s thorough review and decision today. We have now crossed the final regulatory hurdle to close this acquisition, which we believe will benefit players and the gaming industry worldwide,” Smith said in a statement posted on the social media platform X, formally known as Twitter.

FTC can still break apart the deal

Two days after the CMA provisionally approved the deal last month, the US Federal Trade Commission (FTC) revived its challenge to stop the acquisition from going ahead through its own administrative proceedings — essentially an in-house trial. Though the proceedings cannot prevent the merger  from going ahead at this point, the FTC can potentially unwind the deal after it closes.

Today’s CMA decision, however, brings an end to what has been a “tumultuous process for all concerned,” said Alex Haffner, competition partner at UK law firm Fladgate, who added that although the end result was to be expected, it was unusual that Microsoft and Activision had to go to the brink of court proceedings before an accommodation was found.

“The question that is left hanging, therefore, is whether this case shows a merger oversight system in the UK that is too dogmatic in dealing with what is a forward-looking competitive assessment, especially in the case of ‘Big Tech’, or one which can be sufficiently flexible when required, provided always that consumer protection is to the fore,” he said. “It will be particularly interesting to see where the wind blows next, particularly in the context of the next set of merger cases on the CMA’s cab rank, including that concerning Adobe and Figma.”