The UK's Competition and Markets Authority (CMA) has initiated a new Phase-1 investigation into Microsoft Corporation (NASDAQ:MSFT)'s revised proposal to acquire Activision Blizzard Inc (NASDAQ:ATVI).
Microsoft’s revised deal follows confirmation by the CMA that the original deal would be blocked “to protect innovation and choice in cloud gaming”.
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 (excluding the European Economic Area).
Instead, these rights will be divested to French video games publisher Ubisoft Entertainment (OTC:UBSFF, EPA:UBI) prior to Microsoft’s acquisition of Activision.
Ubisoft would also have the flexibility to license out Activision’s content under various business models, including subscription services. Furthermore, the proposal suggests that Ubisoft could require Microsoft to offer versions of games on operating systems other than Windows.
Sam Cardell, chief executive of the CMA, stressed that the competition watchdog is leaving all options on the table regarding the highest-profile merger in gaming history.
“This is not a green light. We will carefully and objectively assess the details of the restructured deal and its impact on competition, including in light of third-party comments,” said Cardell.
“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.
Microsoft's initial bid to acquire Activision Blizzard, the publisher behind the renowned Call of Duty franchise, was initially estimated at US$69 billion.
However, the CMA had staunchly opposed the merger on anti-competitive grounds, particularly concerning the potential exclusivity of Activision’s AAA Call of Duty franchise to Microsoft's platforms.
Microsoft’s largest gaming rival Sony echoed these concerns, fearing that Microsoft might limit or ban the franchise from PlayStation consoles.
The merger's announcement in January 2022 was met with various hurdles, including a temporary restraining order filed by the US Federal Trade Commission and opposition from other global regulators.
The CMA has until 18 October to make a decision.