Microsoft's AU$102 billion acquisition of video game company Activision Blizzard has received approval from European regulators.

In a decision marking the game industry's largest deal to date, the European Commission, Europe's antitrust watchdog, deemed the purchase pro-competitive, citing Microsoft's commitment to licensing popular Activision games to rival cloud gaming services. 

This move addresses concerns about suppressing competition to Microsoft's Xbox game console. 

The approval paves the way for Microsoft to become the world's third-largest game publisher, trailing only Tencent and Sony.

While the EU's decision is a significant milestone, the merger still faces legal challenges in the United States and the UK. 

The Australian Competition and Consumer Commission (ACCC) is also conducting its own review. 

The EU's approval removes a major roadblock, but it does not guarantee success with other regulators.

Sony, the maker of the PlayStation game console, has been opposing the all-cash deal since it was announced over a year ago. 

The company has expressed concerns about losing access to popular Activision game franchises such as Call of Duty and World of Warcraft. 

However, the European Commission dismissed the possibility of Microsoft severing ties with PlayStation, emphasising that excluding the leading gaming console would significantly impact Microsoft's profits.

To address potential issues, Microsoft offered modifications to its licensing agreements, allowing users and cloud gaming platforms to stream its titles without paying royalties for a decade. 

This global licensing strategy aims to empower millions of consumers worldwide to play these games on any device of their choice.

While the European Commission's decision favours the acquisition, British antitrust regulators rejected the merger last month due to concerns about competition in the cloud gaming market. 

The UK's Competition and Markets Authority stands by its decision, stating that Microsoft's proposals would replace a free and competitive market with regulated conditions.

Microsoft intends to appeal the UK's decision at a tribunal, a process expected to take several months. Additionally, the company faces scrutiny from US regulators as the Federal Trade Commission takes Microsoft to court in an attempt to block the deal.