The silliest line in Microsoft president Brad Smith’s whine about the UK was his claim that the Competition and Markets Authority is “not only unelected but unaccountable”. That is an absurdly over-the-top reaction to a regulatory thumbs-down in the UK, on entirely coherent grounds, for Microsoft’s planned $68.7bn (£55bn) takeover of the video games firm Activision Blizzard.
What does Smith want? A national poll to choose the directors of the independent body responsible for competition and consumer protection? In practice, one suspects, Smith would expect to see something like the UK’s current system.
The chair of the CMA, its chief executive and the rest of the board are appointed by the business secretary of the elected government. Grant Shapps, holder of the post at the time, appointed Sarah Cardell as CMA chief executive last December.
As for accountability, Smith must know that CMA decisions can be appealed. Microsoft is free to take its argument to the Competition Appeals Tribunal, a separate body. And, if it doesn’t like what the CAT decides, it can trot along to the court of appeal for another go.
This setup is different from the one that operates in Smith’s and Microsoft’s home patch of the US, but not wildly so. In the US, the Federal Trade Commission (FTC) has to sue to block a deal (which, note, it is now doing in the Activision case). Ultimately, though, the process can end up in court in both countries.
That is why, one trusts, Rishi Sunak will ignore Smith’s invitation to “look hard at the role of the CMA and regulatory structure in the UK” if he wants the tech industry to flourish here.
Microsoft can yank investment from the UK if it wishes, but another part of the global tech industry may be encouraged by the rare sight of a regulator being willing to step into the path of US Big Tech’s steamroller.
Smith hardly helped his case when he tried to paint the UK as a place where it’s hard for a successful tech founder to sell a business. The record shows that the number of deals blocked by the CMA – across all sectors – is tiny in most years.
Indeed, the more common complaint is that the regulator is too willing to accept an acquirer’s proposed remedies to competition concerns. Microsoft tried the remedy route with Activision but the CMA, unusually, wasn’t convinced. Tough.
And, whatever Smith thinks, the EU is not some regulatory paradise for big companies in which every big deal goes through on the nod. Deals sometimes get stopped by Brussels too.
Those who regard Activision hits Call of Duty, Candy Crush and so on as recreational fluff may view the stakes here as low, but nobody should doubt the CMA’s right to inspect the Microsoft deal.
One US company was trying to buy another US company, but the relevant measure is the size of UK revenue. Activision generates about £700m of its global £6bn turnover in the UK, so 10 times the CMA’s £70m cutoff. This was not a marginal case.
On the substance of Smith’s grumble – that Microsoft’s remedies for the cloud part of the gaming market were sufficient – opinion obviously differs, but the CMA hasn’t lost its marbles.
In essence, the takeover would wed a big content company (Activision) to a big next-generation platform provider (Microsoft). The proposal was never going to be a slam-dunk, which is why the FTC and the European Commission are also all over it.
All contractual remedies – especially time-limited ones as offered by Microsoft – must be policed. So, if the CMA had said yes, the regulator would be permanently diving into a cloud market that is still in its infancy.
It is surely a reasonable pro-competition and pro-innovation view of the world to believe, first, that the market should be left to develop freely if cloud-based delivery is the coming force; and, second, that Microsoft is big enough already if it has an estimated 60%-70% of cloud gaming services.
For Smith and Microsoft, it is apparently “the darkest day in our four decades in Britain”. The remark merely advertises Big Tech’s sense of entitlement. Go to appeal, or take the decision on the chin. Either way, get a sense of proportion.
