The UK's regulator, the Competition and Markets Authority (CMA), said it gave the go-ahead to after the restructured deal substantially addressed its earlier concerns.

Microsoft, who make the Xbox, announced the biggest gaming deal in history in early 2022, but the £56bn ($69bn) acquisition was blocked in April by Britain's competition regulator.

It was concerned the US computing giant would gain too much control of the new cloud gaming market, but changes have since been made to the deal.

Last month the regulator appeared to hint the deal would get the go-ahead as French game maker, Ubisoft, agreed to acquire Activision's cloud gaming rights, rather than Microsoft.

But there was criticism for Microsoft by the head of the CMA. "Tactics employed by Microsoft are no way to engage with the CMA", Sarah Cardell, CMA chief executive, said.

"Microsoft had the chance to restructure during our initial investigation but instead continued to insist on a package of measures that we told them simply wouldn't work. Dragging out proceedings in this way only wastes time and money."

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The worry was that Microsoft would lock up competition in cloud gaming as the market takes off, limiting competition and bringing up prices for UK cloud gaming customers.

The new deal, however, "will also help to ensure that cloud gaming providers will be able to use non-Windows operating systems for Activision content, reducing costs and increasing efficiency," the CMA said.

Cloud-based games such as Candy Crush, World of Warcraft and Overwatch are also owned by Activision Blizzard. Cloud games are streamed from servers, rather than accessed from a disc or cartridge on to a gaming console or computer.

Regulators in Europe and the United States had given the green light to the merger, which had left the UK watchdog an outlier.

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The original refusal by the CMA prompted a flurry of lobbying to get the decision overturned with Chancellor Jeremy Hunt adding his voice to call for the deal to pass regulatory hurdles.

In response to the announcement Activision Blizzard said: "The CMA's official approval is great news for our future with Microsoft, and we look forward to becoming part of the Xbox Team."