The European Union has approved Microsoft’s proposed $68.7 billion purchase of gaming giant Activision after the deal was blocked by the UK.

The UK’s Competition and Markets Authority has concerns that the deal – originally agreed in January 2022 – would alter the future of the fast-growing cloud gaming market, leading to reduced innovation and less choice for UK gamers over the years to come.

Microsoft has pledged to continue to make games such as Call of Duty available on Sony’s PlayStation for 10 years, a commitment that failed to convince the CMA but which EU regulators say “fully address the competition concerns identified by the Commission and represent a significant improvement for cloud game streaming compared to the current situation”.

The companies are ‘aggressively’ appealing the UK’s decision which they said meant “the UK is clearly closed for business” and “discourages technology innovation and investment in the UK”.

Microsoft accounts for an estimated 60-70% of global cloud gaming services and has other important strengths in cloud gaming from owning Xbox, the leading PC operating system (Windows) and a global cloud computing infrastructure (Azure and Xbox Cloud Gaming).

The CMA says there was evidence that Microsoft would find it commercially beneficial to make Activision’s games – including Call of Duty, Overwatch and World of Warcraft – exclusive to its own cloud gaming service. 

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However the EU stated: “These licences will ensure that gamers that have purchased one or more Activision games on a PC or console store, or that have subscribed to a multi-game subscription service that includes Activision games, have the right to stream those games with any cloud game streaming service of their choice and play them on any device using any operating system.”

Activision Blizzard CEO Bobby Kotick said: “We intend to meaningfully expand our investment and workforce throughout the EU, and we’re excited for the benefits our transaction brings to players in Europe and around the world.”

Microsoft’s president Brad Smith added: “The European Commission has required Microsoft to licence popular Activision Blizzard games automatically to competing cloud gaming services. This will apply globally and will empower millions of consumers worldwide to play these games on any device they choose.”

However CMA chief executive Sarah Cardell said the agency “stands by its decision”.

“Microsoft’s proposals, accepted by the European Commission today, would allow Microsoft to set the terms and conditions for this market for the next 10 years,” she said. 

“They would replace a free, open and competitive market with one subject to ongoing regulation of the games Microsoft sells, the platforms to which it sells them, and the conditions of sale.”

Gareth Mills, partner at law firm Charles Russell Speechlys, said the differing decisions may seem surprising at face value but there were reasons for this.

“It is worth noting that the EU’s approval is based on Microsoft agreeing to enter into licensing deals with rivals and with other behavioural remedies for future conduct providing regulatory safeguards,” he said. 

“The picture is therefore more complex than a binary ‘approval/ rejection’.” 

The US’s Federal Trade Commission has also blocked the deal.

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