Microsoft–Activision: How the CMA Shifted Position and What the Final Deal Means for the Industry

Five months after blocking the Microsoft–Activision merger, the Competition and Markets Authority has reversed its position and approved the deal. The regulatory journey has been turbulent, involving interventions from the EU, the United States and the UK. This article examines how Microsoft reached this point and what the completed merger means for regulators, workers and the wider gaming market.

How Did We Get Here

In April, the CMA blocked the merger, concluding it would substantially lessen competition in the cloud gaming market. The regulator argued that Microsoft would become too dominant, harming consumers and rival companies.

On 15 May 2023, the EU Competition Commission approved the deal. It accepted Microsoft’s commitments to support cloud gaming competitors, including agreements with companies such as Nintendo.

In the United States, the Federal Trade Commission challenged the merger, arguing that it would make Microsoft anticompetitive. Microsoft successfully defended the deal in court. When the FTC appealed in July 2023, the Ninth Circuit refused to grant emergency relief to pause the merger while the FTC completed its administrative review. This effectively ended the FTC’s challenge, although it still intends to pursue litigation.

This left the CMA as the sole major regulator blocking the deal. Microsoft appealed to the Competition Appeal Tribunal. After the US court’s decision, Microsoft, Activision and the CMA jointly requested a pause in proceedings to negotiate a remedy. The final agreement required Activision to sell its cloud gaming rights outside the EEA to Ubisoft. The CMA accepted this remedy on 13 October 2023 and approved the merger.

Impact on Microsoft and Activision

Microsoft avoided paying a USD$4.5 million breakup fee by completing the deal. Although it spent USD$69 billion, it acquired one of the world’s leading game developers and strengthened its position in the gaming market. Analysts describe this as Microsoft positioning itself to benefit from the fact that half of the USD$188 billion global spending on video games comes from mobile gaming. The company has expanded into cloud gaming to capture this market.

Karol Severin, senior games analyst at Midia Research, noted that conceding cloud streaming rights was not a significant loss for Microsoft, as there are currently no strategic reasons for Activision titles such as Call of Duty to be exclusive to Xbox Cloud Gaming.

The merger also benefits Activision employees. In 2021, the Communications Workers of America accused Activision Blizzard of attempting to undermine unionisation efforts. Microsoft has committed to labour neutrality and reaffirmed its support for employees’ rights to organise. Brad Smith stated that Microsoft remains steadfast in supporting workers’ choices regarding representation.

Impact on Competition Authorities

After approving the deal, CMA chief executive Sarah Cardell said the regulator “will not be swayed by any corporate lobbying”. This reflects the CMA’s growing confidence in regulating large technology companies. The process mirrors a broader trend of activist competition enforcement, also seen in the FTC’s actions against Meta and Google.

The case also demonstrates how national regulators influence one another. The CMA’s willingness to negotiate shifted after the FTC’s court defeat, showing how international decisions can affect domestic regulatory strategy.

Impact on Cloud Gaming and the Wider Technology Market

Despite the CMA’s concerns, Severin believes the merger could be “Microsoft’s Big Bang moment in games”, potentially benefiting consumers but creating long‑term challenges for publishers and developers. Imre Jele, co‑founder of Bossa Studios, expressed scepticism, noting that market dominance rarely benefits audiences or smaller industry players.

IDG Consulting predicts further mergers and acquisitions in the gaming sector, despite volatility in public and private markets. With mixed reactions across the industry, it remains uncertain whether Microsoft’s strengthened position will ultimately benefit or disadvantage developers and consumers.

Conclusion

The Microsoft–Activision merger, the largest in gaming history, marks a significant consolidation of Microsoft’s power and strengthens Xbox’s position relative to competitors such as Sony. Consumers may benefit from broader access to games on a single platform, but developers may face increased pressure in a more concentrated market. The merger also represents progress for Activision workers, who now have greater freedom to unionise under Microsoft’s neutrality commitments.

Competition authorities may now be perceived as more assertive and less predictable by technology companies. However, their activist stance may help balance the interests of consumers, workers and industry participants in an increasingly complex market.