The UK’s competition watchdog has said Microsoft’s revised offer to buy the Call of Duty maker Activision Blizzard “opens the door” to the deal being cleared.
The Competition Markets Authority (CMA) said the updated deal appeared to address concerns it had raised.
Under the new proposals, Microsoft will not buy the cloud gaming rights owned by Activision Blizzard.
Its original $69bn (£59bn) deal was blocked by UK regulators.
Earlier this year, the CMA blocked Microsoft from taking on the whole of Activision over concerns that the deal would harm competition in cloud gaming in the UK.
Microsoft then submitted a restructured deal for the competition watchdog to look at last month.
In a statement on Friday, the CMA’s chief executive, Sarah Cardell, said: “The CMA’s position has been consistent throughout – this merger could only go ahead if competition, innovation, and choice in cloud gaming was preserved.”
A consultation will be opened before a final decision on the deal is taken.
Microsoft’s plan to buy Activision Blizzard was originally announced in January last year, and would be the largest in the history of the gaming industry.
However, it has proved controversial and received a mixed response from regulators around the world.
The deal was passed by regulators in the European Union in May, while the US competition watchdog recently saw its bid to pause the purchase rejected by an appeals court.
When the deal was initially blocked in the UK in April, it was seen as a blow for the government, which wants the country to become a tech powerhouse.
The CMA’s Ms Cardell said: “It would have been far better… if Microsoft had put forward this restructure during our original investigation.
“This case illustrates the costs, uncertainty and delay that parties can incur if a credible and effective remedy option exists but is not put on the table at the right time.”
Sony objected to the deal originally, concerned that Microsoft could stop major games being made available to its own PlayStation business.
Under the new offer, Microsoft has agreed to transfer the rights to stream Activision games from the cloud to the French video games publisher Ubisoft for 15 years.
The sale to Ubisoft of this portion of Activision’s business will mean the cloud streaming of games like Call of Duty, Overwatch and World of Warcraft will not come under Microsoft’s control.
The CMA said that with extra protections, the move would mean that gamers have the opportunity to access Activision’s games in many different ways, including through the cloud-based multigame subscription services.
It added that while it still had “limited residual concerns”, the revised deal was “new and substantially different, 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”.
Microsoft still hopes the merger will boost demand for its Xbox console and its gaming subscription business.
Its vice chairman and president Brad Smith said it was “encouraged” by this positive step.
“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 18 October deadline.”
Microsoft hopes the CMA will make a final decision on the revised bid next month – after the consultation closes on 6 October. Without its approval, the deal cannot go ahead globally.
Activision said that the preliminary approval was “great news” for its future with Microsoft.
“We look forward to working with Microsoft toward completing the regulatory review process,” it added.
