Microsoft (MSFT) is one step closer to clearing its final hurdle in the UK to acquire "Call of Duty" game developer Activision Blizzard (ATVI), a $69 billion deal held up for much of this year by regulatory scrutiny.
On Friday, UK regulator Competition and Markets Authority (CMA) said it had finalized the first phase of reviewing a revised proposal from Microsoft that cedes Activision’s cloud gaming rights to French gaming giant Ubisoft (UBI.PA).
The revision was designed to win favor with CMA, which had previously blocked the deal over concerns it would suppress competition in the cloud gaming market.
The agency had set a deadline of Oct. 18 to review the new proposal; that is also the day an extended deadline for Microsoft’s merger with Activision is due to expire. The two companies first agreed to their deal in January 2022.
On Tuesday, the CMA said in a press release that Microsoft's concession "substantially addresses previous concerns and opens the door to the deal being cleared."
One CMA official said in the release that "this is a new and substantially different deal, which keeps the cloud distribution of these important games in the hands of a strong independent supplier, Ubisoft, rather than under the control of Microsoft."
However, the CMA said it had identified "limited residual concerns" in the proposal, in that certain provisions could be circumvented, terminated, or not enforced.
Microsoft's proposed remedies should address those issues, the agency said. It is now consulting on the proposed remedies before it makes a final decision.
"We are encouraged by this positive development in the CMA’s review process," Brad Smith, Microsoft’s vice chair and president, said.
"We presented solutions that we believe fully address the CMA’s remaining concerns related to cloud game streaming, and we will continue to work toward earning approval to close prior to the October 18 deadline."
Microsoft previously faced regulatory scrutiny in the US, as well. But in July, the Federal Trade Commission withdrew its challenge of the acquisition, leaving CMA as the only competition authority standing in the way of the deal.
Activision Blizzard CEO Bobby Kotick praised the CMA's move forward in a statement, saying: "This is a significant milestone for the merger and a testament to our solutions-oriented work with regulators. I remain optimistic as we continue the journey toward completion and am very grateful to each of you for your dedication and focus throughout this process."
The US agency dropped the challenge based on a federal appeals court that denied its request to temporarily stop the deal from closing.
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Alexis Keenan is a legal reporter for Yahoo Finance. Follow Alexis on Twitter @alexiskweed.