The U.K.’s antitrust regulator will narrow the focus of its probe into Microsoft Corp.’s plan to buy Activision Blizzard Inc. for $68.7 billion.

The Competition and Markets Authority, or CMA, disclosed the development today. 

Microsoft announced its plans to acquire Activision Blizzard early last year. If approved, the deal would establish the technology giant as the world’s third largest video game developer by revenue. Activision Blizzard generated sales of $2.33 billion last quarter, up from $2.16 billion a year earlier. 

The CMA opened an antitrust investigation into the deal last July to understand its market implications. This past February, the regulator released the provisional findings of its probe. CMA officials determined that the deal could substantially lower competition in the video game console and cloud gaming markets.

Acquiring Activision Blizzard would buy Microsoft several of the world’s most popular video games. Those games are available on the technology giant’s Xbox console and Xbox Cloud Gaming service, as well as competing platforms. In its provisional findings, the CMA stated that the company may have an incentive to stop making Activision Blizzard content available on rival platforms.

Microsoft pushed back against the CMA’s reasoning in a response published earlier this month. Today, the regulator disclosed that it has accepted some of the company’s arguments.

The CMA has determined that “the transaction will not result in a substantial lessening of competition in relation to console gaming in the UK,” it announced this morning. Microsoft argued that it doesn’t have a financial incentive to stop offering Activision Blizzard games on rival consoles. The revenue gained through such a move, the company posited, would be offset by the losses it would cause.

“We appreciate the CMA’s additional detailed and objective analysis,” Microsoft Vice Chair and President Brad Smith said in a statement. “Its update underscores a growing consensus by those with access to the most current data that this deal will create more competition in the console market, not less.”

Though it has tentatively concluded that the deal won’t negatively impact the console market, the CMA plans to continue the probe in a more limited form. The investigation will focus on the cloud gaming segment. 

Microsoft has argued that its purchase of Activision Blizzard wouldn’t negatively impact competing cloud gaming services. To address the CMA’s concerns, the company is proposing to license Activision Blizzard games to rivals. Microsoft argues that such an arrangement would ensure the video game maker’s content remains available on competing platforms.

“Our provisional view that this deal raises concerns in the cloud gaming market is not affected by today’s announcement,” said Martin Coleman, the chair of the independent expert panel conducting the antitrust probe. 

The CMA plans to publish its final report about the deal on April 26.

In the U.S., Microsoft’s proposed acquisition is facing an antitrust lawsuit from the Federal Trade Commission. The FTC is seeking to block Microsoft from buying Activision Blizzard over concerns the deal would reduce competition in the console and cloud gaming segments.

Photo: Microsoft