There’s an unwritten rule in banking: don’t fire the regulator. Definitely not in public, and certainly not when they’re about to take on new power over you.
No one told the tech giants.
Microsoft and game maker Activision Blizzard reacted furiously to the UK competition authority’s decision last month to block their $75 billion deal. Activision called it “a detriment to UK citizens” and said the country was “closed for business” with a “worsening economic outlook”. Charming.
Microsoft Vice President Brad Smith argued that the decision would “disincentivize innovation and investment” and, somewhat oddly, noted that “the important role US companies play. . . protect the country from cyber security threats”.
The vitriol feels counterproductive. Not surprisingly, the Competition and Markets Authority opposed Microsoft’s takeover of Activision.
Its main concern, notably in the nascent market for cloud gaming, where the CMA says Microsoft already has a 60 to 70% market share, is shared by regulators globally, including in the United States and Europe. Even if, as has been speculated, the European Commission will ratify the deal next week, that will make it more comfortable with behavioral remedies, where Europe looks like a The exception is more globally than the UK.
The CMA’s drop of objections surrounding console gaming in March may have raised hopes of approval. Most likely, according to practitioners, the move reflects confidence in its case in cloud gaming. Microsoft and Activision will take the decision to trial.
The truth is that the outrage of the tech giants is not widely shared by the UK region. Not so much that the big five tech companies – Google, Apple, Facebook, Amazon and Microsoft, still known as GAFAM despite numerous company name changes – can’t buy anything: CMA has passed the deal from Microsoft to buy artificial intelligence company Nuance last year. But their trade will obviously get a tough look. What is unknown is how much scrutiny of the technology – a global phenomenon – will play out for the rest of the market.
“The question is what will create competition with the biggest companies,” said Dom Hallas of Coadec, a lobbying group for startups. “Who can buy influence UK startups on exit options but also the future shape of the market. That is why every decision of the CMA is of such importance.” In that vein, a verdict on Adobe’s $20 billion purchase of design software company Figma, or on Broadcom’s $69 billion deal to buy VMware, could prove more informative than a deal. Microsoft’s big.
The tech rage seems to have caused a bit of anxiety – politically or otherwise. If anything, the CMA has been increasingly strong at demonstrating that intense, vibrant competition is good for businesses, innovation, customers, and the economy. Globally, there is a sense that the free-enterprise trend is not working, especially in the technology sector but also at large. (Sarah Carddell, head of the CMA, recently highlighted private equity aggregating strategies as an area of particular interest.) The UK is perhaps at the forefront of efforts to expand the public box. regulatory tools to address those concerns.
Notably, the Activision deal was blocked in the same week that the UK government announced a proposal to overhaul the competition framework, including a new digital marketplace unit.
The latter would effectively place the CMA in a role of constant oversight of the biggest tech names, with significant new powers to more easily intervene on concerns about market power or impose behavioral requirements to manage potential harm. The latter can be thought of as retroactive behavioral remedies, a post-factual mitigation for previous underperformance. One way or another, GAFAM will meet a lot of UK regulators.
There are legitimate questions here. “I don’t think any other regulator has such a degree of discretion,” said one expert, referring to the freedom the CMA would have to act under the new bill and scrutiny. appropriateness of its actions.
The outcome of that debate will have a bigger impact on the UK as a place to do tech business than Microsoft-Activision.