U.K. regulator signals approval for Microsoft-Activision deal

Microsoft’s restructured acquisition of Santa Monica video game giant Activision Blizzard “opens the door” to the deal being cleared, U.K. regulators said Friday, removing a major hurdle for closing what would be the gaming industry’s largest merger.

The deal was initially blocked by the U.K.’s Competition and Markets Authority in April, after the regulator raised concerns that the deal would harm competition in cloud-based gaming in the country.

Under the new agreement, Microsoft will not purchase the cloud gaming rights held by Activision, which will instead be sold to an independent third party, rival gaming firm Ubisoft.

As a result, Microsoft would not be in a position to limit access to Activision’s key content to its own cloud gaming service or to withhold those games from rivals, the Competition and Markets Authority said.

“The CMA’s position has been consistent throughout — this merger could only go ahead if competition, innovation, and choice in cloud gaming was preserved,” Sarah Cardell, chief executive of the Competition and Markets Authority, said in a statement. “In response to our original prohibition, Microsoft has now substantially restructured the deal, taking the necessary steps to address our original concerns.”

Microsoft announced the plan to buy Activision Blizzard — maker of popular gaming franchises including “Call of Duty” and “World of Warcraft” — for $68.7 billion in 2022.

“The sale of Activision’s cloud streaming rights to Ubisoft will prevent this important content — including games such as ‘Call of Duty,’ ‘Overwatch,’ and ‘World of Warcraft’ — from coming under the control of Microsoft in relation to cloud gaming,” the Competition and Markets Authority said.

The regulator said it had “limited residual concerns” with the new deal, but that Microsoft has put forward remedies that the CMA has provisionally concluded should address those issues.

The Competition and Markets Authority is now consulting on “remedies” before making a final decision.

“This approval is critical to completing our merger,” Activision Blizzard Chief Executive Bobby Kotick said in an email to employees. “This transaction will help us accelerate our ambitions for the future of gaming and enable us to better serve our players.”