While the CMA has identified limited remaining concerns with the new agreement, Microsoft has proposed solutions that the CMA has provisionally determined will address these matters.

The CMA is currently seeking input on the proposed solutions before making a final decision.

The new agreement

Earlier this year, the CMA blocked Microsoft from acquiring the entirety of Activision due to concerns that it would harm competition in cloud gaming in the UK. Following the rejection, Microsoft submitted a revised transaction in August for the CMA to review.

Under the revised deal, Microsoft will not acquire Activision’s cloud gaming rights, which will instead be sold to an independent third party, Ubisoft Entertainment SA (Ubisoft), before the completion of the deal.

The prior sale of the cloud gaming rights will establish Ubisoft as a major content provider for cloud gaming services, replicating the role that Activision would have played as an independent player in the market.

In contrast to the original agreement, Microsoft will no longer have control over Activision’s cloud gaming rights, thus preventing it from restricting access to Activision’s key content on its own cloud gaming service or withholding games from competitors. Unlike the previously rejected solutions, Ubisoft will have the freedom to offer Activision’s games directly to consumers and all cloud gaming service providers in any manner it chooses, including through buy-to-play or multigame subscription services, or any emerging content delivery models. The agreement with Ubisoft also requires Microsoft to make Activision games compatible with operating systems other than Windows and support game emulators upon request, addressing the other main deficiency in the previous solutions package.

Today’s decision

The CMA believes that the revised deal introduces significant changes that effectively address the concerns raised earlier this year regarding the original transaction.

Specifically, the sale of Activision’s cloud streaming rights to Ubisoft will prevent Microsoft from gaining control over this important content, including games such as Call of Duty, Overwatch, and World of Warcraft, in relation to cloud gaming. The CMA initially found that Microsoft already held a strong position in cloud gaming services and could have used its control over Activision’s content to stifle competition and reinforce its dominance. The new deal ensures that the cloud streaming rights for Activision’s games are transferred to an independent player, Ubisoft, thereby maintaining open competition as the cloud gaming market evolves in the coming years.

While the revised deal differs significantly from the previous transaction and largely addresses most concerns, the CMA still has some remaining concerns that certain provisions in the sale of Activision’s cloud streaming rights to Ubisoft could be bypassed, terminated, or not enforced.

To address these concerns, Microsoft has proposed remedies to ensure that the terms of the sale of Activision’s rights to Ubisoft are enforceable according to the CMA’s requirements. The CMA has provisionally concluded that these additional safeguards should resolve the remaining concerns.

The CMA has now initiated a consultation period, which will run until October 6th, to gather feedback on Microsoft’s proposed remedies.

Colin Raftery, senior director of mergers and Phase 1 decision maker, stated:

“This is a new and significantly different deal that ensures the cloud distribution of these important games remains in the hands of a strong independent supplier, Ubisoft, rather than being controlled by Microsoft.”

“With additional safeguards to ensure the proper implementation of the deal, this will preserve the market structure, allowing open competition to continue shaping the development of cloud gaming in the years to come and giving UK gamers various ways to access Activision’s games, including through cloud-based multigame subscription services.”

Sarah Cardell, CEO of the CMA, commented:

“The CMA’s position has remained consistent throughout – this merger could only proceed if competition, innovation, and choice in cloud gaming were preserved. In response to our initial prohibition, Microsoft has now significantly restructured the deal, taking the necessary steps to address our original concerns.

“However, it would have been preferable if Microsoft had presented this restructuring during our initial investigation. This case demonstrates the costs, uncertainties, and delays that parties may face if a viable and effective remedy option exists but is not proposed at the appropriate time.”

Team,

I want to share an important update on our planned merger with Microsoft.

Today the UK regulatory authority, the CMA, issued a preliminary approval of our merger with Microsoft based on the solutions Microsoft presented in connection with its new merger application. This approval is critical to completing our merger.

The next step is for the CMA to gather third-party feedback, after which the CMA will reach a final decision.

As I said when we announced the deal, this transaction will help us accelerate our ambitions for the future of gaming and enable us to better serve our players. Microsoft recognizes the commitment to excellence and creative independence that has served us well for the last 30 years. I am confident that their resources, technology, and tools will provide us even greater opportunities to create even better games.

This is a significant milestone for the merger and a testament to our solutions-oriented work with regulators. I remain optimistic as we continue the journey toward completion and am very grateful to each of you for your dedication and focus throughout this process.

As the regulators continue their process, I will keep you updated on our progress towards our expected closing.

With gratitude,

Bobby