Microsoft’s £60bn Call of Duty deal set to be approved by regulator

British regulators appear set to approve Microsoft’s £60 billion takeover of video game maker Activision Blizzard after the US tech giant pulled out in a bitter dispute with authorities.

The Competition and Markets Authority (CMA) – which initially blocked the mega-merger – said an amended proposal from Microsoft ‘substantially addresses previous concerns and opens the door to approval of the deal’.

But in a swipe at Microsoft and Activision bosses who reacted furiously to the original decision, CMA chief executive Sarah Cardell said it would have been ‘much better’ if they had made these concessions earlier in the process.

Analysts said the US company could have avoided the protracted battle if it had not “ignored” signals from regulators in their efforts to push through the deal.

Microsoft, owner of the Xbox gaming console, agreed to acquire Activision in January last year, giving it ownership of games such as Call of Duty and World of Warcraft.

But while the partnership was approved by regulators in Europe, it was blocked by the CMA in April this year over fears it would give Microsoft too much power over the cloud gaming market, which allows players to stream computer games over the internet.

The decision sparked a furious reaction, with Microsoft labeling the move as Britain’s ‘darkest day in four decades’, while Activision claimed Britain was ‘clearly closed for business’.

But the CMA stood firm and forced the two companies to reconsider the terms of the merger.

A new deal was proposed in August, which would see the rights to stream Activision games outside the European Economic Area (EEA) sold to French company Ubisoft Entertainment, creator of the Assassin’s Creed series.

It meant that Microsoft would have no control over the rights to stream these games online outside the EEA, which consists of EU members and Iceland, Liechtenstein and Norway, but not the United Kingdom.

Cardell dismissed the criticism, saying: ‘The CMA’s position has been consistent throughout: this merger could only go ahead if competition, innovation and choice in cloud gaming were maintained.

“In response to our original ban, Microsoft has now substantially restructured the deal and taken the necessary steps to address our original concerns.”

She also took aim at the US companies, saying: ‘It would have been much better if Microsoft had raised this restructuring during our original investigation.

“This case illustrates the cost, uncertainty and delay that parties can incur if a credible and effective resolution option exists but is not brought to the table at the right time.”

Brad Smith, vice chairman and president of Microsoft, said: “We are encouraged by 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, and we will continue to work towards obtaining approval.”

The watchdog has now opened a consultation on other solutions proposed by Microsoft to tackle ongoing competitive concerns. This consultation will close on October 6, ahead of the formal deadline for the deal on October 18.

Despite the deal being on the verge of approval, some observers joined the CMA boss in criticizing the tech giant’s approach to the negotiations.

‘Microsoft should have avoided this long and expensive path to approval entirely; they ignored every signal from the CMA and UK market requirements,” said Gareth Sutcliffe, games analyst at Enders Analysis.

But he added that the value of the deal was “still intact” and was “a relief for foreign investment in the UK game development sector.”

The CMA was considered the last major hurdle to securing the merger, which would make Microsoft the world’s largest video game company and overtake its main rival Sony.

The deal has been approved by the EU, while a legal challenge to the ties in the US was previously rejected in court.