Microsoft closes in on Activision deal after UK approves deal

Microsoft moved a step closer to completing its $69 billion acquisition of video game maker Activision Blizzard on Friday, in a deal that served as an example of how the company can successfully deal with tighter regulatory controls on the tech giant's power.

Britain's Competition and Markets Authority, the last remaining agency to sign off before Microsoft completes the acquisition, said the companies had taken steps that “substantially address” remaining antitrust concerns. The regulator initially tried to block the deal, saying it would reduce competition, but reversed course after Microsoft agreed not to buy part of Activision's business related to so-called cloud gaming, a small but promising new area for the industry.

First announced in January 2022, the acquisition has been scrutinized by antitrust officials around the world and is being conducted as a test of whether regulators will approve the tech megamerger amid concerns about industry power. The deal disrupts the video game market, combining Microsoft's Xbox business with Activision, publisher of popular video games such as Call of Duty and World of Warcraft.

But Microsoft, which has a history of thorny antitrust disputes dating back to the 1990s, has been able to navigate its way through tough regulatory opposition on both sides of the Atlantic. In July, the company won a court battle against the Federal Trade Commission, which had tried to block the deal. The European Union, typically an aggressive regulator of American tech firms, cleaned Deal in May.

“Microsoft was very strategic in its approach to how it played out the whole process from start to finish,” said Ioannis Kokoris, professor of competition law and economics at Queen Mary, University of London.

He said it was incredibly rare for Britain's CMA to reverse course and that the agency had faced huge pressure to approve the deal after it cleared hurdles in other jurisdictions.

“When you're the last man standing, you can't realistically block a deal when the UK represents less than 5 percent of global revenue,” said Tommaso Valletti, an economics professor at Imperial College Business School who has worked on antitrust cases. European Commission.

On Friday, British regulators said Microsoft had met their concerns. The CMA initially blocked the deal because it said a merger between a top-selling console maker and a hit games publisher would threaten the emerging field of cloud gaming technology. Although still a very small market, the technology allows people to play games on phones, tablets and other devices, reducing the need for traditional consoles.

Microsoft has agreed to transfer the cloud streaming licensing rights for all current and new Activision Blizzard games to Ubisoft Entertainment, a rival game publisher. The deal runs for 15 years, a move seen as a ban on Microsoft releasing Activision games exclusively on its own streaming service.

“The CMA believes that the restructured deal makes significant changes that substantially address the concerns it raised about the original transaction earlier this year,” the agency said in a statement. statement on Friday.

The regulator said it will now “consult” until October 6 on the remedies Microsoft has proposed before making a final decision on whether to approve the deal.

“We are encouraged by these positive developments in the CMA review process,” said Brad Smith, president of Microsoft, in a statement. “We look forward to working with Microsoft to complete the regulatory review process,” Activision Blizzard said in a statement.

The companies said they plan to close the deal by Oct. 18.

Government control of the growing power of the technology industry shows no signs of slowing. A trial began this month over claims by the US Department of Justice and a group of states that Google abused its power in the online search market. On Friday, EU regulators said they would reimpose a $400 million fine against Intel for abusing its power in the semiconductor market. EU authorities are also investigating Apple, Google, Meta and Microsoft for other anti-competitive business practices.

Mr. Kokoris said Microsoft's mix of court battles and business concessions was something to consider when making big acquisitions for other tech companies.

“It will certainly make the big techs more willing to pursue a deal, but companies now know they're going to have to give up more than they thought they would before,” he said.

This week, Cisco agreed to buy cybersecurity company Splunk for $28 billion. Broadcom, the semiconductor giant, is also nearing completion of its $61 billion acquisition of software company VMware.