Microsoft has submitted a revised proposal to U.K. regulators for its acquisition of American game publisher Activision Blizzard, following the rejection of its initial offer.
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LONDON — The competition regulator in the U.K. stated on Friday that Microsoft’s restructured takeover proposal of Activision Blizzard, which was submitted in August, “paves the way for the deal to receive clearance.”
The U.K. Competition and Markets Authority (CMA) had previously blocked Microsoft’s initial $69 billion transaction in January 2022, raising concerns about potential competition restrictions in the emerging cloud gaming sector.
As a result, Microsoft introduced a new takeover deal, which includes divesting cloud rights for existing Activision PC and console games, as well as future games published by Activision over the next 15 years, to French game publisher Ubisoft Entertainment before the sale is finalized.
The CMA has indicated that it still has some concerns about the new deal, particularly regarding the possibility of certain provisions in the sale of Activision’s cloud streaming rights to Ubisoft being circumvented, terminated, or not enforced.
Microsoft has proposed remedies to address these concerns and ensure that the CMA can enforce the terms of the sale. The regulator is now seeking feedback on these proposals until October 6.
Both Microsoft and Activision have expressed their satisfaction with the CMA’s announcement.
“We are pleased with this positive development in the CMA’s review process. We have presented solutions that we believe fully address the CMA’s remaining concerns regarding cloud game streaming. We will continue to work towards obtaining approval to close the deal before the October 18 deadline,” said Brad Smith, Microsoft’s vice chair and president, in a statement.
Activision Blizzard CEO Bobby Kotick added, “The CMA’s preliminary approval is fantastic news for our future with Microsoft. We are delighted that the CMA has responded positively to the solutions proposed by Microsoft, and we look forward to collaborating with them to complete the regulatory review process.”
The CMA’s objections primarily revolve around concerns about Microsoft gaining an advantage in the growing cloud gaming market, which enables users to stream games through subscription services, similar to watching shows on Netflix. Cloud gaming has the potential to eliminate the need for expensive specialized consoles, allowing players to access games on PCs, mobile phones, and TVs.
Alex Haffner, a competition lawyer at U.K. law firm Fladgate, stated that the announcement provides interested parties with two weeks to comment on the proposed remedies before a final decision is made. However, it appears likely that the deal will be given full clearance.
Haffner also noted, “Once the dust settles on this tumultuous investigation, there will be important lessons to be learned by all parties involved. The scrutiny of how competition regulators such as the CMA handle ‘Big Tech’ will continue to attract significant attention.”
The CMA has been the most steadfast opponent of Microsoft’s acquisition of the Call of Duty maker. The deal has also faced criticism from European Union authorities and U.S. regulators. The EU officials were the first to approve the transaction in May, after Microsoft offered concessions such as royalty-free licenses for cloud gaming platforms to stream Activision games purchased by users. The CMA rejected similar terms.
In contrast, the U.S. Federal Trade Commission attempted to halt the acquisition through legal action. However, a federal judge in San Francisco denied the injunction in July.
— CNBC’s Arjun Kharpal contributed to this report
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