Microsoft’s proposed buyout of video game publisher Activision Blizzard has been blocked by the UK’s regulatory body–the Competition and Markets Authority (CMA)–for concerns about the cloud gaming market. Microsoft president Brad Smith has criticized the decision, calling it the “darkest day” in the company’s 40-plus years in Britain. Smith also voiced his skepticism about the CMA’s leadership and its possible negative impact on the country’s technology and investment sectors. In response, the head of the CMA defended the decision and expressed disappointment that the deal would not be approved.
The CMA’s Ruling and Smith’s Response
The CMA’s main concern is cloud gaming, a sector that Microsoft has been pursuing as part of its efforts to grow its cloud computing services. CMA believes that the proposed deal could limit competition and innovation, which could prevent new market entrants from competing with Microsoft. Smith, on the other hand, believes that the CMA’s argument is based on a flawed understanding of the market and that it represents a potential concern rather than a real one. He also pointed out that the cloud gaming market in the UK is currently small, and therefore, the CMA’s decision is disproportionate to the size of the market.
Microsoft has been doing business in the UK for four decades and has actively worked with government, non-profit organizations, and profit-making companies. Smith believes that the CMA’s decision would discourage innovation and investment in the UK, and that it sends a wrong message to the business community, both locally and internationally. He also suggested that the CMA’s decision could shake the confidence of investors in the UK’s technology sector, calling it the “darkest day” in Microsoft’s four-decade presence in Britain. Smith also criticized the CMA’s decision-making process and the way it ignored Microsoft’s proposals and questions.
The EU and Competition
Besides criticizing the CMA’s decision, Smith also praised the EU’s regulatory process, saying that it was more willing to engage in dialogue to help get a deal done. Smith suggested that the EU is a more attractive place to do business than the UK and that the UK’s decision could push Microsoft towards relocating its operations to Europe.
The decision by the CMA to block the proposed deal is not the final nail in the coffin yet. Microsoft has started the appeal process, and there are still other jurisdictions in which the deal must be approved or rejected. The EU will hand down its decision by May 22, while in the US, the Federal Trade Commission (FTC) is set to hold its first evidentiary hearing in August 2023. In the meantime, Microsoft may propose new remedies or concessions to get the deal approved.
CMA’s Response
In response to Smith’s comments, the head of the CMA, Sarah Cardell, defended the organization’s decision to block the Microsoft deal. She disagreed with Smith’s assertions that the UK regulatory environment was unfriendly to technology companies or that the CMA’s decision would discourage investment or innovation. Instead, Cardell said that the decision was made to prevent Microsoft from consolidating its already strong position in the cloud gaming market, which could limit competition and reduce innovation.
Final Thoughts
The CMA’s decision to block the Microsoft buyout of Activision Blizzard is likely to reverberate around the UK’s technology and investment sectors. Microsoft has been an important player in these industries for many years, and its frustration with the CMA’s decision illustrates the challenges that global tech companies face in dealing with national regulatory bodies. It also highlights the need for regulators to strike a balance between competition and innovation, on the one hand, and preventing monopolies on the other.
