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Microsoft's dramatic Activision Blizzard concessions show regulators in the ascendant

"Not a green light" says CMA's chief executive of reworked proposal, with Microsoft's acquiescence coming after President's "bad for Britain" statements

When the UK’s competition watchdog blocked one of the technology world’s biggest acquisitions earlier this year – Microsoft’s $75 billion bid for gaming company Activision Blizzard – Microsoft executives were furious: “I think it’s bad for Britain… People's confidence in technology in the UK has been severely shaken”  President Brad Smith said.

Now the software behemoth has made some substantial and dramatic changes to the deal in a bid to win approval, after the Competition and Markets Authority (CMA) warned it would hurt innovation in an emerging cloud gaming market (a market likely to be turbocharged by 5G innovations.) That includes relinquishing rights to Activision rival Ubisoft to distribute Activision Blizzard titles including Call of Duty.

"As a result of the agreement with Ubisoft, Microsoft believes its proposed acquisition of Activision Blizzard presents a substantially different transaction under UK law than the transaction Microsoft submitted for the CMA’s consideration in 2022," Microsoft said.

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It’s a twist that showcases the growing influence of regulators across industries – with the banking and financial services world also investing heavily in compliance technologies. It triggers a fresh investigation but as a lot the leg work has already been done, Microsoft is hopeful of getting the reworked deal approved by an October 18, 2023 deadline.

“This is not a green light” CMA chief executive Sarah Cardell said, saying on Tuesday that the watchdog will “carefully and objectively” review the renewed application. (As the Financial Times notes crisply: "Under the restructured deal, Ubisoft acquires cloud streaming rights to Call of Duty and all other Activision games including new ones released over the next 15 years, which it would retain in perpetuity. These rights would be exclusive everywhere except within the EEA. The concessions Microsoft made earlier in the year to Brussels, including licences to other cloud services, would be honoured. Other subscription services, such as streaming giants like Netflix, would be able to license the games as part of the agreement.")

The CMA has become increasingly feisty in recent years: Between March 2021 and April 2022 the CMA imposed £406.2 million in fines, and in 2021 took antivirus company Norton to court for its “completely unacceptable” refusal to provide “certain information” pertaining to its auto-renewals, earning changes.

With just under 900 staff and net expenditure equivalent to 0.05% of Microsoft’s 2022 revenues the changes are the latest sign that regulators (no matter how superficially outgunned) are somewhat in the ascendancy. Broadcom's $61 billion Broadcom VMware buyout is on track to close in late October however, according to the chipmaker, after the deal was given final clearance by the CMA this week – despite its earlier forceful criticism of the planned buyout.

Buckle up: $61 billion VMware acquisition a done deal  by October 30, says Broadcom