Microsoft Makes Concession To Win UK Activision Approval

A major concession has been made by Microsoft in order to convince the British regulator to approve Redmond’s deal to buy Activision Blizzard for $69 billion (£54bn).

The UK’s Competition and Markets Authority (CMA) has been the world’s last remaining competition regulator opposing the deal, when in April it officially blocked the acquisition, citing potential harm to the nascent market for cloud gaming.

The European Commission has already approved the deal, while the US Federal Trade Commission (FTC) suffered a court defeat over its own efforts to block the Microsoft-Activision deal,

Shortly after that US court ruling, the UK’s CMA said it was prepared to reconsider the case if Microsoft were to restructure it, in an unprecedented move.

Major concession

Now Microsoft has submitted to the CMA a new acquisition deal for it to review, which contains a major concession for the UK regulator – after it imposed a Final Order which prohibits the original deal on a worldwide basis.

The CMA announced it has now opened a new phase 1 investigation into a new, restructured deal by Microsoft to buy Activision.

Under the restructured deal, Microsoft will not acquire cloud rights for existing Activision PC and console games, or for new games released by Activision during the next 15 years (this excludes the European Economic Area), the CMA noted.

Instead, these rights will be divested to Ubisoft Entertainment SA (Ubisoft) prior to Microsoft’s acquisition of Activision.

Revised deal

Essentially that means that Activision’s (ATVI) cloud streaming rights outside the European Union and three other European countries are to be sold to a rival, Ubisoft Entertainment.

CMA chief executive Sarah Cardell said the regulator would now consider the new proposal.

“The CMA has today confirmed that Microsoft’s acquisition of Activision, as originally proposed, cannot proceed,” said Cardell.

“Separately, Microsoft has notified a new and restructured deal, which is substantially different from what was put on the table previously,” said Cardell. “As part of this new deal, Activision’s cloud streaming rights outside of the EEA will be sold to a rival, Ubisoft, who will be able to license out Activision’s content to any cloud gaming provider. This will allow gamers to access Activision’s games in different ways, including through cloud-based multigame subscription services. We will now consider this deal under a new Phase 1 investigation.”

“This is not a green light,” Cardell cautioned. “We will carefully and objectively assess the details of the restructured deal and its impact on competition, including in light of third-party comments. Our goal has not changed – any future decision on this new deal will ensure that the growing cloud gaming market continues to benefit from open and effective competition driving innovation and choice.”

Important step

Microsoft President Brad Smith said in a blog post Tuesday that the companies believe the revised proposal “presents a substantially different transaction” for the CMA to consider than its previous merger agreement.

“Today, we are taking another important step regarding this transaction,” wrote Smith. “To address the concerns about the impact of the proposed acquisition on cloud game streaming raised by the UK Competition and Markets Authority, we are restructuring the transaction to acquire a narrower set of rights.”

Microsoft president Brad Smith. Image Credit: Microsoft

“This includes executing an agreement effective at the closing of our merger that transfers the cloud streaming rights for all current and new Activision Blizzard PC and console games released over the next 15 years to Ubisoft Entertainment SA, a leading global game publisher,” said Smith. “The rights will be in perpetuity.”

“As a result of the agreement with Ubisoft, Microsoft believes its proposed acquisition of Activision Blizzard presents a substantially different transaction under UK law than the transaction Microsoft submitted for the CMA’s consideration in 2022,” Smith added.

“We believe that this development is positive for players, the progression of the cloud game streaming market, and for the growth of our industry,” Smith concluded.

The new CMA investigation will reach a decision on 18 October 2023.

Tom Jowitt

Tom Jowitt is a leading British tech freelancer and long standing contributor to Silicon UK. He is also a bit of a Lord of the Rings nut...

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