The UK competition regulator has finally approved Microsoft’s $69 billion deal to buy the gaming giant Activision Blizzard 21 months after it was first agreed.

The revised deal for Microsoft to buy Activision without cloud gaming rights has been cleared after the Competition and Markets Authority (CMA) concluded that it would preserve competitive prices and better services. In blocking the original deal earlier this year the watchdog had previously cited concerns about fair competition in the cloud gaming market.

In August Microsoft made a concession that would result in Ubisoft, instead of itself, buying Activision’s cloud gaming rights over the next 15 years, putting them in the hands of a “strong and independent competitor”. Activision, based in the United States, makes games including Call of Duty, Candy Crush and World of Warcraft.

As a result of the concession the CMA agreed to look afresh at the deal and opened a new investigation. Its original decision against the tie-up had provoked a furious backlash, with both companies claiming that it showed that the UK was “closed for business” and resulted in the regulator being questioned by politicians about the decision.

Sarah Cardell, chief executive of the CMA, said today: “With the sale of Activision’s cloud streaming rights to Ubisoft, we’ve made sure Microsoft can’t have a stranglehold over this important and rapidly developing market. As cloud gaming grows, this intervention will ensure people get more competitive prices, better services and more choice. We are the only competition agency globally to have delivered this outcome.”

A spokesman for 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.”

Brad Smith, Microsoft’s president, said: “We’re grateful for the CMA’s thorough review and decision today. We have now crossed the final regulatory hurdle to close this acquisition, which we believe will benefit players and the gaming industry worldwide.”

Smith’s words this morning are quite at odds with his reaction at the time the deal was blocked, when he said on national radio that the regulator’s decision showed that the UK was “clearly closed for business”.

His words provoked handwringing from politicians and business leaders about the UK business landscape. The CMA’s original investigation blocked the deal on the grounds of Microsoft’s strength in cloud gaming.

Cardell hit out at the politicisation of the case in a statement: “The CMA is resolute in its determination to prevent mergers that harm competition and deliver bad outcomes for consumers and businesses. We take our decisions free from political influence and we won’t be swayed by corporate lobbying.

“Businesses and their advisers should be in no doubt that the tactics employed by Microsoft are no way to engage with the CMA. 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.”

The tussle over the outcome has led some to criticise the CMA for being too heavy handed as it was the only regulator to block the deal; others have praised it, though, for standing up to Big Tech. Some in the City have watched the process nervously, concerned that Smith was right and the regulator’s initial block would put businesses off trying to do deals or invest in the UK.

Gareth Mills, partner at the law firm Charles Russell Speechlys, said the change of position on such a high-profile case by the CMA was unprecedented: “Competition law is about to get sexy again. A raft of competition issues relating to the massive tech companies are coming down the track and will be with us very shortly indeed. Why? It largely comes down to just how big these businesses have become, some pushing $1 trillion valuations, leading to growing concern from regulators as to their supranational dominance.”

With this final hurdle out of the way, Microsoft no longer has to pay a $5 billion break-up fee and the companies will now turn to considering their future strategy. Microsoft has a product called Game Pass, like a Netflix for games, and there is speculation that Activision’s blockbuster games might soon be made available on the platform.

Microsoft still faces legal problems in the US. The Federal Trade Commission will move forward with its in-house trial against the acquisition after pausing that process over the summer, according to an order the agency issued in September.