UK Regulator Grants Preliminary Approval To Microsoft’s Activision Blizzard Acquisition

Last month, Microsoft submitted a new deal to the U.K.’s Competition and Markets Authority regulatory agency that proposes Ubisoft get the rights to Activision Blizzard game streaming for 15 years. Microsoft did this to get its acquisition of Activision Blizzard approved by the CMA after the regulator previously blocked it over cloud gaming concerns. One month later, the CMA has granted preliminary approval to Microsoft due to its new Ubisoft deal.

The CMA says it has “identified limited residual concerns with the new deal” but that Microsoft has put forward remedies (see: Ubisoft’s role) that the CMA “has provisionally concluded should address these issues.” The CMA is now consulting on those remedies before making a final official decision ahead of the October 18 deadline to do so.

“The CMA considers that the restructured deal makes important changes that substantially address the concerns it set out in relation to the original transaction earlier this year,” the CMA writes in a new article. “In particular, 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 CMA originally found that Microsoft already has a strong position in cloud gaming services and could have used its control over Activision content to stifle competition and reinforce this position.

“The new deal instead results in the cloud streaming rights for Activision’s games being transferred to an independent player, Ubisoft, maintaining open competition as the market for cloud gaming develops over the coming years. While the restructured deal is materially different to the previous transaction and substantially addresses most concerns, the CMA has limited residual concerns that certain provisions in the sale of Activision’s cloud streaming rights to Ubisoft 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 right to Ubisoft are enforceable by the CMA. The CMA has provisionally concluded that this additional protection should resolve those residual concerns. The CMA has now opened a consultation, until [October 6], on Microsoft’s proposed remedies.”

CMA CEO Sarah Cardell says the agency has been consistent from the jump, noting that this merger “could only go ahead if competition, innovation, and choice in cloud gaming was preserved.” Cardell says, “It would have been better, though, if Microsoft had put forward this restructure during our original investigation,” adding that this case illustrates the “cost, 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.”

Microsoft vice chair and president Brad Smith said the following on Twitter following the CMA’s preliminary approval:

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

We are encouraged by this positive development in the CMA’s review process. We presented solutions that we believe fully address the CMA’s remaining concerns related to cloud game streaming, and we will continue to work toward earning approval to close prior to the October 18…

— Brad Smith (@BradSmi) September 22, 2023

Activision Blizzard CEO Bobby Kotick wrote the following email to the company today:

“Team, I want to share an important update on our planned merger with Microsoft. Today, the UK regulatory authority, the CMA, issued a preliminary approval of our merger with Microsoft based on the solutions Microsoft presented in connection with its new merger application. This approval is critical to completing our merger. The next step is for the CMA to gather third-party feedback, after which the CMA will reach a final decision. “As I said when we announced the deal, this transaction will help us accelerate our ambitions for the future of gaming and enable us to better serve our players. Microsoft recognizes the commitment to excellent and creative independence that has served us well for the last 30 years. I am confident that their resources, technology, and tools will provide us even greater opportunities to create even better games. This is a significant milestone for the merger and a testament to our solutions-oriented work with regulators. I remain optimistic as we continue the journey toward completion and am very grateful to each of you for your dedication and focus throughout this process. “As the regulators continue their process, I will keep you updated on our progress towards our expected closing. With gratitude, Bobby.”