In 2022, the CMA investigated the proposed acquisition of Activision Blizzard by Microsoft Corporation and found potential competition concerns in both the console and cloud gaming markets, in light of Microsoft’s existing strengths as a game developer, publisher and console owner and its ownership of the Windows PC operating system, Azure cloud gaming architecture and the Xbox Cloud platform. That, coupled with the popularity of Activision games, such as Call of Duty, currently available on rival games platforms, such as PlayStation, could make it difficult for rivals to compete in the sale of Activision games. The CMA later amended its provisional findings to remove concerns about the impact of the merger on the console gaming market, finding that Microsoft would not have a financial incentive to make Call of Duty exclusive to its Xbox on console.

In its Final Report, issued 26 April 2023, the CMA stated that the merger may have been expected to result in substantial lessening of competition in the supply of cloud gaming services in the UK. On 22 August 2023, the CMA issued the Microsoft and Activision Merger Inquiry Order 2023 prohibiting the merger as originally notified to it.

Subsequently, Microsoft submitted a new deal for review by the CMA, under which Microsoft would acquire Activision but not its cloud streaming rights outside the EEA (Microsoft needs to retain such (non-exclusive) rights within the EEA to meet commitments given to the European Commission as a condition of the Commission’s approval of the merger under EU law). Instead, Activision’s global cloud streaming rights, for existing Activision PC and console games or for new games released by Activision in the next 15 years, would be divested to Ubisoft SA. Ubisoft would be able to supply Activision’s games to all cloud gaming service providers (including Microsoft) under any business model of its choosing and it could require Microsoft to provide versions of the games on operating systems other than Windows. Ubisoft would pay for the rights by means of a one-off payment as well as through a market-based wholesale pricing mechanism including pricing based on usage. Effectively, as an independent entity, Ubisoft would be free to license streaming rights in Activision games to cloud gaming services globally as it wishes and under any business model of its choosing, preventing Microsoft from releasing Activision games exclusively on its own game streaming service (Xbox Cloud Gaming) or controlling exclusively the licensing terms of Activision games on rival services.

In response, the CMA launched a completely new merger investigation. On 22 September 2023, it announced that the re-structured merger proposal substantially addressed the CMA’s cloud gaming concerns but that it held residual concerns that proposed provisions in the Ubisoft licence agreement could be circumvented, terminated or not enforced. In response, Microsoft and Activision offered a set of detailed undertakings including commitments that Ubisoft may not grant Microsoft exclusive streaming rights to the Activision games or offer Microsoft preferential pricing, that Microsoft will ensure there is feature parity between the streaming and non-streaming versions of the games and allowing for an appointment of a Monitoring Trustee to oversee compliance with the undertakings if required by the CMA.

The CMA provisionally concluded that the undertakings resolved its residual concerns and launched a consultation as to whether to accept the undertakings in lieu of a reference of the merger for a phase 2 investigation, and a separate consultation to determine if it should now consent to the merger under the Order made in August.

The consultations closed on 6 October. The CMA has now accepted the undertakings offered by the parties and has consented to the merger pursuant to the Order made in August, subject to the condition that the agreement under which Ubisoft acquires the cloud gaming rights to Activision’s games is signed ahead of the merger. This means the merger can now proceed.

For more information, click here.