Microsoft’s President Brad Smith Slams The CMA, Calls for UK PM Intervention
Concerns over Xbox’s cloud market dominance led to the Competition and Markets Authority (CMA) of the United Kingdom to prohibit Microsoft’s proposed acquisition of Activision. The regulator’s action was undoubtedly surprising.
Microsoft President Brad Smith strongly criticized the CMA’s judgment in an interview with the BBC’s Wake Up to Money show. He started by painting a dismal picture of future IT investments in the UK in light of this judgement. Furthermore, he said that the UK’s cloud gaming business is so limited that Microsoft doesn’t even broadcast games to more than 5000 users at once.
Unfortunately, I think it’s bad for Britain. The business community, the investment community, and the technology sector around the world have been following this case, and the strong message the CMA has sent is not just to surprise everyone who fully expected this acquisition to be approved but to send a message that I think will discourage innovation and investment in the United Kingdom. In that sense, the impact of this decision is far broader than on Microsoft or this acquisition alone.Brad Smith
That was only the Microsoft president’s first attack; he then praised the European Union’s regulatory procedure in comparison to that of the UK, saying that the English Channel has never felt broader. The European Union is anticipated to announce its own decision next month. While the CMA has unelected, unaccountable regulators currently also making bad choices, the EU’s regulators, who are responsible to their elected leaders, were open to discussing fixes. Smith continued on that note:
What Microsoft offered to the CMA was a commitment that these very games we are acquiring would be available from services that are not run by Microsoft, they’re not sold by Microsoft. They would be available on other computer operating systems and other devices. Not those from Microsoft. We think that’s good business because that’s how the games would be distributed as broadly as possible.
Last but not least, Microsoft’s president sent UK Prime Minister Rishi Sunak a note urging the government to give the Competition and Markets Authority (CMA) a close examination.
By agreeing to 10-year deals with cloud gaming service providers like NVIDIA (for GeForce NOW), Boosteroid, Ubitus, and EE, who would get all of Microsoft’s games, including Activision Blizzard’s if the transaction was approved, Microsoft attempted to reassure authorities like the CMA in advance. The CMA determined that these arrangements did not meet the criteria for meaningful customer benefits because they would have a “highly uncertain” effect on UK consumers.
Microsoft’s efforts to purchase Activision Blizzard have undoubtedly been seriously hampered by the CMA decision. The Competition Appeal Tribunal (CAT), which may require a review of the matter by the CMA if they decide that the regulatory body behaved unlawfully or unreasonably in reaching its judgment, was notified of both firms’ desire to appeal. It could even completely contradict it and make a different ruling.