Microsoft/Activision Blizzard deal blocked

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Microsoft’s President Brad Smith has fired a withering broadside at the Competition and Markets Authority following its decision to block the tech giant’s bid to acquire Activision.

The CMA’s decision to block the tech giant’s $69bn (£55bn) takeover of games maker Activision Blizzard blind-sided many industry watchers and could scupper the entire deal, especially if the authorities in the US and EU follow the CMA’s lead.

Smith was not only critical of the decision, no surprise there, but also accused the CMA of not seeming to be willing to engage with either company over how they could address their regulatory concerns.

In an interview with the BBC he even suggested that the decision, “sends a message that I think will discourage innovation and investment in the United Kingdom.” He continued, “I think the impact on the UK unfortunately is to shake the confidence among the business community in the UK and the CMA as a regulatory agency. When we study the decision, we feel in part it’s based on such a flawed or just faulty understanding of the market.”

In its defence Sarah Cardell, the CMA’s chief executive, said the decision would be good for UK gamers and businesses and that there was “a lot of alignment” between the UK position and that of the US Federal Trade Commission.

Cardell said that the UK was absolutely open for business and the decision to block the deal would support competition in the UK, and create an environment where, “a whole host of different companies would be able to compete effectively, grow and innovate.”

Cloud gaming sees central servers stream games to players rather than them using local devices and it is expected to radically change the nature of the games market, a market that is huge in the UK – in fact it is the UK’s largest entertainment sector.

Cardell pointed out that Microsoft has a 60% to 70% share of cloud gaming, while Activision Blizzard has a strong portfolio of games.

Smith argues that with just 5,000 cloud gamers in the UK that argument is over blown.

Smith is certainly angry.

Asked whether the decision will affect Microsoft’s investment decisions, Smith said: “It certainly will not help. It’s extremely disappointing and even frustrating.” He even called for a rethink of the CMA’s role might be needed.

“I think that if the government of the United Kingdom wants to bring in investment, if it wants to create jobs and if it wants to make the United Kingdom a home where technology is not only going to flourish but be creative, then it needs to look hard at the role of the CMA, the regulatory structure, this transaction, and the message that the United Kingdom has sent to the world.”

To date, the CMA is the only competition authority globally to have blocked a big tech merger, it prevented Meta from acquiring the gif search engine Giphy last year, and this would be its second.

Microsoft already has the most powerful cloud gaming platform and should the deal go through it would certainly strengthen that position even further and would probably harm competing cloud platforms and undermine innovation and product choice, no matter what Smith says.

His reaction smacks of yet another example of a big tech company throwing a wobbly because it didn’t get what it wanted.

Smith was certainly belligerent, but will Microsoft really limit its engagement with the dynamic and fast-growing gaming market here in the UK?  

The bigger issue is whether this decision will have more profound implications for inward investment into the UK as a whole and on that point, I think the jury is still out.