CMA unblocks Microsoft/Activision deal without cloud gaming

The Competition and Markets Authority (CMA) has accepted a deal from Microsoft on its purchase of Activision, which will exclude Activision cloud gaming from the UK market for the next 15 years.

Earlier this year, the CMA blocked Microsoft’s full acquisition of Activision Blizzard due to concerns that the deal would harm competition in cloud gaming in the UK. The CMA’s objection contradicted the European Commission’s decision, which found that Microsoft would have no reason to refuse to distribute Activision’s games to Sony, its main rival.

The European Commission found that since Sony is the leading distributor of console games worldwide, including in the European Economic Area (EEA), Microsoft would have a strong incentive to continue distributing Activision’s games via Sony’s PlayStation console.

In the UK market, however, under the latest agreement, Microsoft will not purchase the cloud gaming rights held by Activision. These will instead be sold to an independent third party, Ubisoft Entertainment SA (Ubisoft), before the deal is completed.

In contrast to the original deal, the CMA said Microsoft would no longer control cloud gaming rights for Activision’s content, so it would not be in a position to limit access to Activision’s key content to its own cloud gaming service or to withhold those games from rivals.

Unlike the remedies it previously rejected, the CMA said Ubisoft would be free to offer Activision’s games directly to consumers and to all cloud gaming service providers however it chooses, including buy-to-play or multigame subscription services, or any new model for providing content that might emerge as the market develops.

The deal with Ubisoft also requires Microsoft to port Activision games to operating systems other than Windows and support games emulators when requested, addressing the other main shortcoming with the previous remedies put forward.

“The CMA’s position has been consistent throughout – this merger could only go ahead if competition, innovation and choice in cloud gaming was preserved,” said CMA CEO Sarah Cardell. “In response to our original prohibition, Microsoft has now substantially restructured the deal, taking the necessary steps to address our original concerns.”

Colin Raftery, senior director of mergers and Phase 1 decision maker at the CMA, said: “This is a new and substantially different deal, which keeps the cloud distribution of these important games in the hands of a strong independent supplier, Ubisoft, rather than under the control of Microsoft.”

Although the last major impediment to the Microsoft/Activision deal now appears to have been resolved. Alex Haffner, specialist competition lawyer and partner at UK law firm Fladgate, said: “Once the dust settles on what has been a tumultuous investigatory process, there will be important lessons to be learned by all concerned and the ongoing spotlight on the way that competition regulators such as the CMA deal with ‘Big Tech’ will continue to attract significant attention.”