It’s not hyperbolic to look at the Competition and Markets Authority’s (CMA) decision on the proposed merger between gaming giants Microsoft and Activision-Blizzard as a watershed moment for post-Brexit regulation in Britain. Not only has the case driven significant criticism and scrutiny against the regulator, but it also has provoked larger, more existential questions about the role of a regulator in modern markets and the UK’s divergence from other countries.
The CMA appears to be embracing this new landscape, positioning itself as a more dynamic, independent and critical regulator in the tech landscape.
The proposed acquisition of Activision-Blizzard, the studio behind huge franchises as Call of Duty and World of Warcraft, drew the CMA’s attention due to Microsoft’s longstanding rivalry with Sony. The competition between Microsoft’s Xbox and Sony’s PlayStation created concerns Microsoft would stop PlayStation users from playing the newest Call of Duty titles, although Microsoft firmly denied this would be the case.
The CMA’s decision to step in and block the merger drew the ire of many. Brad Smith, President of Microsoft, was engaged in furious backroom discussions with Chancellor Jeremy Hunt about the CMA overstepping itself and described London as ‘Death Valley’ for tech businesses in contrast with the USA’s ‘Silicon Valley’. Hunt appeared to budge, and advocated for the CMA to ‘understand wider responsibilities’ for regulators to promote economic growth before clarifying the CMA’s independence from the Government is necessary and beneficial.
Is the UK really ‘closed for business’ as Brad Smith claims? Some seem to think so, including the Centre for Policy Studies Matthew Feeney, who described the CMA’s actions as “intent on stifling innovation by blocking American technology companies from acquiring one another”. Others are concerned impending regulation and legislation to promote online safety and level the playing field for tech companies – the Online Safety Bill and Digital Markets, Competition and Consumers Bill (or DMCC) respectively – are heavy-handed attempts to impose social values which will scare away foreign investment and make UK-based companies struggle to compete with other markets.
And yet, other see opportunities for a meaningful and fruitful divergence from the USA and European Union with newfound Brexit freedoms. Now the European Commission is no longer in charge of competition merger investigations, the UK had two choices: follow the EU and approve the deal or put their foot down and force Microsoft to restructure their proposed merger. The CMA emphatically chose the latter.
The CMA’s role in British society is not only under greater scrutiny, but has greater stakes. Tech is undeniably becoming more important, not just economically but also in matters of national security supply chains for semiconductors and its application to other sectors like biotech and defence. The CMA’s recent actions with the DMCC Bill both indicate Big Tech will be the new battleground for debates about economic competitiveness, consumer wellbeing, and striking a balance which ultimately benefits British society.
Concerns the CMA is being overly proscriptive are perhaps overblown. The CMA is ultimately fulfilling its role of scrutinising mergers until their fears of market failures are assuaged, and their scepticism of Big Tech companies is no different to the EU (with its Digital Markets Act) or the USA (where Senators recently tried to pass an Open App Markets Act and the American Innovation and Choice Online Act). This indicates more of a synchronicity with global markets and regulators than a divergence.
What’s ultimately most important is whether UK truly has the flexibility to mark out its own regime on digital regulation, experimenting with trial and error to find the right balance between holding companies accountable and remaining open for business. It’s likely the CMA will accept Microsoft’s latest proposal for the merger with Activision-Blizzard, which includes guarantees for open access across gaming platforms and protections in the cloud gaming space. Such action would reinforce the CMA’s international reputation for rigour and due process while indicating to tech giants this regulator will not simply roll over for large companies with even larger budgets.
Microsoft is under immense pressure to complete a deal before the required deadline on 18th October, so it’s likely concessions will continue to be made until the CMA is satisfied. The cross-party support for the DMCC further solidifies the CMA’s position as a strong and independent regulator which will have global influence in the decades to come. As long as the CMA continues to have this level of support for firm interventions, companies like Microsoft will continue to be on the losing side of this battle.