Microsoft has successfully persuaded regulators around the world to clear its $68.7 billion acquisition of Activision Blizzard — the biggest deal of its kind the gaming industry has ever seen — and has completed the deal.
Microsoft overcame concerns about the deal’s effect on competition in the industry — particularly in the nascent cloud gaming market — and ardent lobbying against the deal by competitor Sony. The U.K.’s Competition and Markets Authority first decided to block the acquisition, then agreed to further talks with Microsoft and Activision and has now given it the green light. The U.S. Federal Trade Commission has withdrawn its attempt to block the deal legally after a federal judge ruled in favor of Microsoft being allowed to close the deal. The European Union gave the deal its seal of approval.
Here’s the full rundown on Microsoft’s fight to snap up Activision Blizzard.
Microsoft announces that, after 21 months, the deal has closed
Hot on the heels of the U.K. regulator giving the deal its formal seal of approval, Microsoft announced on Oct. 13 that it had completed its acquisition of Activision Blizzard and was beginning the process of merging the publisher with Xbox. Activision Blizzard CEO Bobby Kotick will stay on until the end of 2023. Read our full report.
U.K. regulator formally clears deal, which is now expected to close imminently
After indicating its provisional approval on Sep. 22, The U.K.’s Competition and Markets Authority formally cleared Microsoft to close its acquisition of Activision Blizzard on Oct. 13, with the concession that cloud gaming rights for Activision Blizzard’s games will go to Ubisoft. With no other regulatory blocks outstanding — the EU is reportedly not going to reexamine the revised deal — Microsoft and Activision are expected to close the deal imminently. An announcement as early as Friday Oct. 13 had been expected.
In its statement, the CMA called Microsoft’s concession over cloud gaming rights “a gamechanger that will promote competition.” Activision Blizzard said, “The CMA’s official approval is great news for our future with Microsoft, and we look forward to becoming part of the Xbox Team.” Microsoft president Brad Smith said, “We’re grateful for the CMA’s thorough review and decision today. We have now crossed the final regulatory hurdle to close this acquisition, which we believe will benefit players and the gaming industry worldwide.”
U.K. regulator gives provisional approval, removing last major obstacle to the deal
On Sep. 22, the U.K.’s Competition and Markets Authority said its concerns about the deal’s impact on competition in cloud gaming had been substantially addressed by Microsoft’s proposal to carve out the cloud gaming rights to Activision Blizzard games and sell them to Ubisoft. Although not yet final, the decision removes the last major regulatory hurdle to the deal closing before its Oct. 18 deadline. Read our full report.
FTC withdraws its case against the merger, clearing way for talks
According to Reuters and Bloomberg, the Federal Trade Commission has withdrawn its administrative case against Microsoft’s acquisition of Activision Blizzard, which was due to go before an in-house judge in August. Microsoft and Activision had requested the case be withdrawn after the FTC lost its case arguing for a block on the deal in district court, and was denied an extension of a temporary block by an appeals court.
The move means Microsoft and Activision can now try to persuade the U.S. antitrust regulator to accept a settlement. After its loss in court, the FTC doesn’t have a lot of leverage, although Microsoft may offer some token of compromise to show that it’s willing to work with regulators and governments.
Microsoft and Activision delay deal deadline by three months
On July 19, Microsoft and Activision announced that they had agreed to push back the deadline on the acquisition by three months, to Oct. 18. This will give the companies time to negotiate with the U.K. regulator and find a solution to its concerns. Read our full report.
Microsoft and UK regulator given two months to arrive at new agreement
Microsoft and Activision’s appeal against the U.K. antitrust regulator’s decision to block the acquisition has been officially paused for two months while the two sides attempt to come to a new agreement. The U.K.’s Competition Appeal Tribunal allowed the pause on July 17, as reported by Reuters. The pause had been requested jointly by Microsoft, Activision, and the Competition and Markets Authority after Microsoft’s court victory against the U.S. Federal Trade Commission prompted them to see if a compromise could be reached.
The appeals process is now delayed until late September. Meanwhile, the CMA has also pushed its own deadline for making a final order until Aug. 29, but the regulator said it expects to be able to make a decision ahead of that date. According to Bloomberg, Microsoft and Activision will also choose to extend the deadline clause on their deal, which had been due to expire on July 18, in order to work things out with the CMA.
Sony signs Call of Duty agreement with Microsoft, signaling end to its opposition of the deal
Sony has signed a deal with Microsoft that will keep Call of Duty available on PlayStation for 10 years after Microsoft’s acquisition of Activision Blizzard. Sony’s Jim Ryan had been holding out, hoping he could help regulators block the deal outright instead, but it seems he now expects the merger to close following Microsoft’s defeat of the FTC in court. Read our full report.
FTC’s request to extend block on the deal fails
The FTC’s appeal against Judge Jacqueline Scott Corley’s July 11 ruling that Microsoft should be allowed to complete its acquisition of Activision Blizzard has hit a serious stumbling block. The FTC had sought emergency relief which would prevent the deal from being closed while the results of its appeal are determined. But the Ninth Circuit Court of Appeal has denied the FTC’s request.
“We appreciate the Ninth Circuit’s swift response denying the FTC’s motion to further delay the deal. This brings us another step closer to the finish line in this marathon of global regulatory reviews,” Microsoft’s Brad Smith said in a statement to The Verge. Microsoft is now free to complete the deal in the U.S., but it may need to wait until it can conclude negotiations with the U.K. regulator first.
Microsoft and UK regulator return to negotiating table
Following the Tuesday July 11 U.S. court ruling in favor of Microsoft being allowed to complete the acquisition of Activision Blizzard, Microsoft and the U.K.’s Competition and Markets Authority — the only remaining blocker to the deal — have agreed to put legal action on hold and see if a compromise can be worked out.
“While we ultimately disagree with the CMA’s concerns, we are considering how the transaction might be modified in order to address those concerns in a way that is acceptable to the CMA,” Microsoft president Brad Smith said in a statement. “In order to prioritize work on these proposals, Microsoft and Activision have agreed with the CMA that a stay of the litigation in the UK would be in the public interest and the parties have made a joint submission to the Competition Appeal Tribunal to this effect.”
With the U.K. now isolated in its opposition to the deal, Microsoft presumably feels in a strong position to restart talks. Its appeal against the CMA’s decision, due to go before the Competition Appeal Tribunal in late July, will be put on hold, and Microsoft may well be hoping it can resolve matters quickly without having to extend the July 18 deadline on the deal.
But it will need to offer the CMA something. CNBC reports that this is already done and “Microsoft and the CMA have agreed on a small divestiture,” meaning carving out a part of either Microsoft or Activision’s business — perhaps Microsoft’s cloud gaming operation in the U.K.
U.S. judge gives the deal the green light
Judge Jacqueline Scott Corley decided on July 11 that Microsoft should be allowed to complete its acquisition of Activision Blizzard before its July 18 deadline, ruling against the FTC’s request for a block until it had completed its own administrative case against the deal. This effectively renders the FTC toothless, and means it is unlikely to see its case through. Read our full report.
The focus now switches to the block of the deal now in place in the U.K. Microsoft and Activision have said they intend to appeal the Competition and Markets Authority’s decision, but may need to extend the deadline on their deal to do so.
Sony says it wouldn’t tell a Microsoft-owned Activision Blizzard about the next PlayStation
In a deposition for this week’s federal court hearing on the Activision Blizzard deal — as reported by Axios’ Stephen Totilo — PlayStation chief Jim Ryan stated that Sony would feel unable to share confidential details of its next console with developers at Activision Blizzard if the company were bought by Microsoft. “We simply could not run the risk of a company that was owned by a direct competitor having access to that information,” Ryan said, arguing that Activision Blizzard would then be disincentivized from making games that take advantage of a new PlayStation’s unique features.
In the deposition, Ryan is asked about how Sony worked with Minecraft developer Mojang after its acquisition by Microsoft, but this exchange has mostly been redacted.
It seems that, in the court hearing, the FTC is returning to arguments centered on competition with PlayStation in the console market, even though the U.K. regulator ultimately dismissed these concerns and framed its rejection of the deal around competition in cloud gaming instead.
The hearing begins today in San Francisco, and will only determine if Microsoft will be legally blocked from completing the acquisition until the FTC has concluded its deliberations on the deal in its own administrative court. Despite this limited scope, Microsoft will likely go in to the hearing with all its legal guns blazing, and treat it as its last, best chance to argue for the deal to go through.
EU approves the deal, says it will improve cloud gaming
Confirming earlier reports, the European Commission, the governing body of the European Union, said on May 15 that it has approved Microsoft’s acquisition of Activision Blizzard. Announcing the decision of its antitrust regulators, the Commission noted the commitments offered by Microsoft in support of the deal represented “a significant improvement for cloud gaming as compared to the current situation.”
This puts the EU at loggerheads with the U.K. regulator, which has decided to block the deal specifically over its concerns that it would harm competition in the young, growing cloud gaming market. The EU said that Microsoft’s deals to make Activision Blizzard’s games available on other cloud gaming providers had fully addressed its concerns.
It’s a big win for Microsoft, but the tech giant is still unable to complete its deal without the approval of the UK’s Competition and Markets Authority. At the least, however, it will give Microsoft’s lawyers more ammunition as they prepare to appeal the CMA’s decision.
Microsoft says Activision deal block is “darkest day” of doing business in the UK
Microsoft president Brad Smith has made clear the depth of the tech giant’s anger at the blocking of its acquisition of Activision Blizzard by U.K. regulator the CMA. In an interview with the BBC, Smith said Microsoft’s confidence in doing business in the country was “severely shaken” and suggested it would be looking at doing more business in the European Union — a message presumably meant to butter up EU regulators, who have yet to report their findings on the deal, as well as stir up the politically sensitive issue of Brexit in the U.K.
The decision is “bad for Britain” and the “darkest day in our four decades in Britain,” Smith said. “It does more than shake our confidence in the future of the opportunity to grow a technology business in Britain than we’ve ever confronted before. People are shocked, people are disappointed, and people’s confidence in technology in the U.K. has been severely shaken. There’s a clear message here - the European Union is a more attractive place to start a business than the United Kingdom.”
UK regulator decides to block deal over cloud gaming concerns
In an announcement that came as a surprise to observers, and especially Microsoft and Activision Blizzard, the U.K. Competition and Markets Authority concluded its review of the acquisition on April 26 with a decision to block the deal. The CMA, which recently set aside its concerns about the effect of the merger on the console market, said the decision was based on its feeling that the deal would inhibit competition in the small but fast-growing cloud gaming market. Microsoft and Activision Blizzard immediately pledged to appeal the decision. Read our full report.
Microsoft finalizes deal to bring Call of Duty to Nintendo for 10 years
Microsoft has confirmed that it has signed a “binding 10-year legal agreement” to put Call of Duty on Nintendo platforms on “the same day as Xbox, with full feature and content parity.” Microsoft vice chair and president Brad Smith announced the deal on Twitter.
“We are committed to providing long-term equal access to Call of Duty to other gaming platforms, bringing more choice to more players and more competition to the gaming market,” Smith’s statement read. His wording, and the agreement itself, are clearly aimed at regulators deliberating over Microsoft’s proposed acquisition of Activision Blizzard, among whom the accessibility of Call of Duty to other platforms has been seen as a key issue. The deal will bring Call of Duty back to Nintendo consoles for the first time since 2013.
The contract was first announced in December, alongside a similar offer to Steam; at the time, Valve boss Gabe Newell waved the offer aside, saying his trust in Microsoft and its gaming chief Phil Spencer was so deep that such a contract wasn’t necessary, and that he believed it was in Microsoft’s interest to keep Call of Duty widely available anyway. Microsoft says it has made the same offer to Sony, but the PlayStation platform holder is presumably holding out, preferring to plead with regulators to kill the deal entirely.
War of words gets uglier as Sony accuses Microsoft of “harassment” and Activision accuses Sony of “sabotage”
The wrangling over Microsoft’s acquisition of Activision Blizzard has entered a testy phase. In court documents responding to Microsoft’s subpoena of internal Sony documents (see below), Sony’s lawyers have accused Microsoft of “obvious harassment” — in particular for requesting performance reviews of Sony executives. That’s according to Feb. 9 reporting by Axios and Kotaku. “This is not an employment case,” Sony said.
Meanwhile, controversial Activision Blizzard chief Bobby Kotick has come out swinging after a couple of years in stealth mode. Just after telling MSNBC that blocking the deal would turn the U.K. into “Death Valley,” Kotick told the Financial Times that Sony was “trying to sabotage” the deal and that Sony leadership was refusing to return calls from Microsoft and even Activision itself. Of course, Sony and Activision are close partners on the PlayStation version of Call of Duty, among other things. Kotick says the idea that Microsoft would not support Activision games on PlayStation is “absurd.”
Things are clearly getting a little heated as the three biggest governments’ regulators line up against the deal. But, interestingly, analysts at Wedbush Securities reckon it’s all just hot air. In a note to investors (as reported by VGC), Wedbush’s Nick McKay and Michael Pachter said that the U.K.’s CMA, and the other regulators, are maneuvering to look tough and extract concessions from Microsoft because they know they have “a losing legal argument,” and the merger is in fact “close to being approved.” In other words, it’s all a political game of double bluff. It’s enough to make your head spin.
Microsoft says it hopes to bring its pro-union approach to Activision Blizzard
On Jan. 6, as reported by The Verge, Microsoft ran an ad in the Washington Post highlighting its acceptance of unions, co-signed by the Communication Workers of America union. “As we enter a new year, we remain committed to creating the best workplaces we can for people who make a living in the tech sector. When both labor and management bring their voices to the bargaining table, employees, shareholders and customers alike benefit,” the note reads. Then it adds: “During 2023, we hope to bring the same agreement and principles to Activision Blizzard, which Microsoft has proposed to acquire.”
This is certainly a pitch to the FTC that Microsoft can improve working conditions at Activision Blizzard, which has shown resistance to a move to unionize among its employees after the dreadful scandal about its workplace culture in 2021. The ad highlights the successful unionization of 300 Bethesda and ZeniMax workers after Microsoft’s acquisition of that company, and concludes by saying, “We aren’t asking the FTC to ignore competition concerns. On the contrary, we believe it’s important to explore solutions that protect competition and consumers while also promoting the needs of workers and economic growth and American innovation.”
What happens next?
Microsoft will begin the process of integrating the Xbox and Activision Blizzard teams under Phil Spencer, and move toward putting Call of Duty and other titles on Game Pass.
Update (Oct. 13): This article has been updated to reflect the completion of Microsoft’s acquisition of Activision Blizzard on Oct. 13.
