The UK Competition and Markets Authority (CMA), which had vetoed the deal in May, said it’s prepared to evaluate proposals from Microsoft and has agreed to a stay in the companies’ appeal before the Competition Appeal Tribunal.

“We stand ready to consider any proposals from Microsoft to restructure the transaction in a way that would address the concerns,” a CMA spokesperson said, adding that Microsoft and Activision have agreed with the CMA that a stay of litigation in the UK “would be in the public interest” until all parties have submitted their offers.

Microsoft and Activision can’t close their deal because of the UK veto, said Tom Smith, a competition lawyer at Geradin Partners.

“If Microsoft closes the transaction at this moment, it would be a breach of the CMA’s Interim Order, which could leave Microsoft open to a large fine up to 5% of global group revenues of the two parties combined,” said Smith, an ex-CMA legal director.

And while Microsoft and Activision were ebullient about the US decision and UK pause, antitrust experts cautioned that the British regulator’s statement doesn’t mean a settlement is a given. The CMA moved forward alone to win challenges unwinding Meta Platforms’ acquisition of Giphy and blocked Sabre’s deal to buy Farelogix, said Bill Kovacic, a former director at the agency.

“They are not afraid to do it on their own,” said Kovacic of the CMA, who also served as the US FTC chair during the George W Bush administration.

Activision shares rose 11% to $91.57 at 2.09 pm in New York. The gap between the stock price and Microsoft’s takeover offer of $95 has narrowed to $3.43, compared with $12.30 as of Monday close. Microsoft was little changed.

The CMA announcement came after Judge Jacqueline Scott Corley in San Francisco ruled that the US Federal Trade Commission hadn’t shown Microsoft’s merger with Activision would harm competition for gaming. The decision means 38 jurisdictions have given their blessing to the deal, which has a July 18 deadline for closing.

Microsoft has said it struck the deal to acquire Activision in order to add mobile games — an area where it has virtually no presence. Activision owns King, the maker of Candy Crush. The combination will vault Microsoft to the No 3 slot among global video game companies behind China’s Tencent Holdings Ltd, the publisher of League of Legends, and game console rival Sony, Microsoft had said.

“We’re grateful to the court in San Francisco for this quick and thorough decision,” Microsoft President Brad Smith said. “Our focus now turns back to the UK. 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.”

In an email to staff, Activision Chief Executive Officer Bobby Kotick said the company was “optimistic that today’s ruling signals a path to full regulatory approval elsewhere around the globe”.

The FTC said it was “disappointed in this outcome” and would be “announcing our next step to continue our fight to preserve competition and protect consumers” in the coming days.

The antitrust agency could opt to appeal Corley’s ruling or move forward with an in-house proceeding over the deal after it is consummated. The judge’s order allows the FTC to appeal by July 14.

In her decision, Corley denied the FTC’s preliminary injunction, which sought to block the deal on the grounds it would harm gamers.

“The FTC has not shown it is likely to succeed on its assertion the combined firm will probably pull Call of Duty from Sony PlayStation, or that its ownership of Activision content will substantially lessen competition in the video game library subscription and cloud gaming markets,” she said.

At a June hearing, the FTC argued Microsoft’s acquisition of Activision would harm competition since the combined company would have an incentive to withhold key titles, like top-selling shooter game Call of Duty, from rival consoles and subscription services.

The lawsuit was part of an effort by FTC Chair Lina Khan to more aggressively police mergers, particularly those by the biggest tech platforms. Since President Joe Biden appointed her to helm the agency in June 2021, the FTC has killed mergers between Lockheed Martin and Aerojet Rocketdyne Holdings as well as Nvidia’s bid to buy SoftBank Group’s Arm.

Microsoft’s paltry mobile gaming presence will see a boost after the tech giant rolls in Activision Blizzard’s Candy Crush and Call of Duty Mobile. Mobile gaming is the fastest-growing segment of the gaming industry and is valued at $92-billion — half of the global gaming market, according to analytics firm NewZoo.

However, critics have concerns that Microsoft will use its new leverage to disadvantage competitors like Sony by decreasing access to its blockbuster titles or publishing more games exclusively to Xbox and PC.

Corley found evidence presented at the five-day hearing showed the deal would lead to more consumer access to Activision offerings.

“Microsoft’s acquisition of Activision has been described as the largest in tech history. It deserves scrutiny. That scrutiny has paid off: Microsoft has committed in writing, in public, and in court to keep Call of Duty on PlayStation for 10 years on parity with Xbox,” Corley said. “It made an agreement with Nintendo to bring Call of Duty to Switch. And it entered several agreements to for the first time bring Activision’s content to several cloud gaming services.”

(With assistance from Dina Bass, Cecilia D’Anastasio and Katharine Gemmell.)