The UK’s competition watchdog has cleared Microsoft’s $69bn (£54bn) deal to buy Activision Blizzard, the maker of games including Call of Duty and World of Warcraft, in a move that paves the way for both companies to complete the transaction.
The Competition and Markets Authority (CMA) moved to block the megadeal in April, citing concerns that Microsoft – the maker of the Xbox gaming console – would dominate the nascent cloud gaming market.
Last month, however, the watchdog said a revised deal that included selling cloud gaming rights outside Europe to Activision’s French rival Ubisoft had substantially addressed its concerns, indicating the tie-up would be approved.
Sarah Cardell, the CMA’s chief executive, said on Friday that the competition regulator had ensured that Microsoft could not have a “stranglehold” over cloud gaming, which allows users to stream video games stored on remote servers on to their devices.
“As cloud gaming grows, this intervention will ensure people get more competitive prices, better services and more choice,” Cardell said.
Cardell also turned on Microsoft in the statement, saying the company had initially persisted with a deal structure that would not work, before amending its proposal.
“Businesses and their advisers should be in no doubt that the tactics employed by Microsoft are no way to engage with the CMA,” she said. “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.”
The evolution of the regulatory process behind the deal has surprised some experts, after the CMA signalled it would block the deal in April. Then in July, it supported Microsoft’s decision to pause an appeal against a prohibition – and said it would hold discussions about a restructured transaction.
Speaking to the Guardian, Cardell said the CMA’s reputation had not been damaged by the back-and-forth over the deal.
“The reputation of the CMA is very strong as a consequence of this process,” she said. “It is very clear that we have stood firm in the face of a lot of comments and that we have held our ground, that this deal could only proceed if our concerns were addressed.”
Gustaf Duhs, a partner at UK law firm Stevens & Bolton and a former CMA lawyer, defended the watchdog’s approach, saying anomalies in the case were not of the CMA’s making and pointing to Cardell’s statement that the organisation “does not want this process to be followed in future cases”.
Nevertheless, Max von Thun, the Europe director at the Open Markets thinktank, said there was a “serious risk that in their dealings with the CMA, merging companies and their advisers will no longer take no for an answer”.
The CMA said Microsoft’s concessions on cloud gaming would allow Ubisoft to offer multigame subscription services, would help ensure that cloud gaming services could use non-Windows operating systems for Activision content, and would keep prices for such services competitive. The concessions, which include a 15-year deal with Ubisoft, prevent Activision titles from being offered exclusively on Microsoft’s Xbox Cloud Gaming service.
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Activision had accused the UK of being “closed for business” after the original CMA investigation. The US company’s chief executive, Bobby Kotick, said in a note to staff on Friday that the company was ready to finalise the transaction, which had been due to expire on 18 October.
“We now have all regulatory approvals necessary to close and we look forward to bringing joy and connection to even more players around the world,” he wrote.
Brad Smith, the president of Microsoft, who had described the CMA’s original decision to block the deal as the “darkest day” in the company’s UK history, said on Friday he was grateful for the decision.
He said: “We have now crossed the final regulatory hurdle to close this acquisition, which we believe will benefit players and the gaming industry worldwide.”
The UK regulator had appeared increasingly isolated in its position blocking the takeover after its EU counterparts passed the deal – when Microsoft offered alternative concessions on cloud gaming rights in the European Economic Area – and the US competition regulator failed to secure a court injunction to stop it.
The Federal Trade Commission is maintaining its opposition to the deal but it cannot prevent Microsoft and Activision from completing it by 18 October.
