Regulators permitted the sale after addressing competition worries
Microsoft has finalized its $69 billion acquisition of Activision Blizzard, the developer behind games like Call of Duty and World of Warcraft, following the approval of the UK’s competition regulator. The Competition and Markets Authority (CMA) initially opposed the deal in April due to concerns about Microsoft’s potential dominance in the emerging cloud gaming sector. However, in the previous month, the CMA stated that revised terms, including the sale of cloud gaming rights beyond Europe to Activision’s French competitor Ubisoft, had satisfactorily addressed these concerns, indicating that the merger would be authorized. The CMA officially approved the deal on Friday, and Microsoft subsequently confirmed the transaction’s completion in a regulatory filing.
The CMA’s CEO, Sarah Cardell, emphasized that the regulator had taken steps to prevent Microsoft from exerting excessive control over cloud gaming, a technology that enables users to stream video games from remote servers to their devices.
Cardell stated, “As cloud gaming expands, our intervention will guarantee consumers benefit from more competitive pricing, improved services, and increased options.”
In her statement, Cardell expressed her criticism of Microsoft, stating that the company had initially pursued a deal structure that was not viable and only made amendments later.
She mentioned, “It should be clear to businesses and their advisors that the strategies Microsoft employed are not a suitable way to interact with the CMA.” Cardell added, “Microsoft had the opportunity to revise their proposal during our initial investigation, but instead, they insisted on a set of measures that we had clearly communicated would not be effective.
The evolution of the regulatory process surrounding the deal has taken some experts by surprise. In April, the CMA initially indicated its intention to block the deal. However, in July, it endorsed Microsoft’s decision to temporarily halt an appeal against the prohibition and announced its intention to engage in discussions about a revised transaction.
Cardell affirmed that the CMA’s reputation remained unharmed despite the back-and-forth regarding the deal. She stated, “The CMA’s reputation remains solid as a result of this process. It is evident that we have maintained our stance in the face of numerous comments and firmly held our position that this deal could only proceed if our concerns were adequately addressed.
Gustaf Duhs, a partner at the UK law firm Stevens & Bolton and a former CMA lawyer, supported the watchdog’s approach, asserting that the anomalies in the case were not the result of the CMA’s actions. He also highlighted Cardell’s statement that the organization “does not want this process to be followed in future cases.”
Nonetheless, Max von Thun, the Europe director at the Open Markets thinktank, expressed concerns that there was a “significant risk that merging companies and their advisors will no longer accept a negative response from the CMA.”
The CMA stated that Microsoft’s concessions related to cloud gaming would enable Ubisoft to offer multi-game subscription services, facilitate the use of non-Windows operating systems for Activision content in cloud gaming services, and maintain competitive pricing for such services. These concessions, which involve a 15-year agreement with Ubisoft, prevent Activision’s titles from being exclusively available on Microsoft’s Xbox Cloud Gaming service.
After the initial CMA rejection, Activision accused the UK of being “closed for business.” The CEO of the US company, Bobby Kotick, noted in a message to staff on Friday that the company was excited about “spreading happiness and connecting with even more players worldwide.
Today marks an opportune moment for gaming,” commented Phil Spencer, the Chief Executive of Microsoft Gaming, in a post on X. He will oversee the Activision business, with Kotick remaining in his position until the year’s end.
Spencer has presented this acquisition as a strategic move for Microsoft to enter the lucrative mobile gaming market, valued at over $90 billion. Activision is known for popular mobile titles such as Candy Crush Saga and Call of Duty: Mobile, which were not part of the cloud streaming Ubisoft agreement.
The CMA had found itself increasingly isolated in its decision to block the takeover, especially after its EU counterparts approved the deal. Microsoft offered alternative concessions related to cloud gaming rights in the European Economic Area, and the US competition regulator was unable to secure a court injunction to halt the transaction.
While the US Federal Trade Commission (FTC) continues to oppose the deal, it has been unable to prevent Microsoft and Activision from finalizing it. Rebecca Allensworth, a law professor at Vanderbilt University, suggested that even if an internal trial within the FTC were to block the deal, it’s unlikely that they would succeed in unwinding it, as a federal court might take a different stance on the matter.
The decision within the FTC would need to withstand scrutiny in federal court, which appears improbable, especially given that earlier this summer, a court declined to halt the deal, even without the restructuring that aimed to reduce competitive concerns,” she remarked.
The FTC stated on Friday that it is concentrating on its appeal but will “evaluate” Microsoft’s agreement with Ubisoft.
