Microsoft is engaging in open warfare with the United Kingdom after the country's regulator ruled against approving Redmond's merger with Activision Blizzard. Since this week's decision to stop the $69bn deal, Microsoft has gone on the offensive. Company President, Brad Smith, has now said the EU is a better business center than post-Brexit UK, drawing a pushback from the country's Prime Minister.
The Competition and Markets Authority (CMA) in the UK blocked Microsoft's proposed $68.7bn cash acquisition of Activision Blizzard. In a shock decision, the regulator says that it has concerns about how the deal will impact competition in the growing cloud gaming market.
Smith already said yesterday that Microsoft will “discourage technology innovation and investment in the UK”, while Activision says it will “reassess our growth plans for the UK”.
Microsoft Hits Back at the CMA's Decision
Speaking to the Today Programme on BBC Radio 4, Smith doubled down and said people around the globe we “shocked” by the decision. He also says he thinks the decisions is harmful for the British economy:
“We're, of course, very disappointed about the CMA's decision, but more than that, unfortunately, I think it's bad for Britain,” Smith says.
“There's a clear message here: the European Union is a more attractive place to start a business if you want some day to sell it. The ‘English Channel' has never seemed wider.”
He adds: “For all of us who had some hope that post Brexit, the UK would construct a structure that would be more flexible, be better for investment, be better for technology, we're now finding that the opposite appears to be true.”
Smith's says the decision will also “discourage innovation and investment in the United Kingdom. And I think in that sense, the impact of this decision is far broader than on Microsoft or this acquisition alone. People's confidence in technology in the United Kingdom has been severely shaken…”
“Microsoft has been in the United Kingdom for 40 years. And we play a vital role not just supporting businesses and nonprofits but even defending the nation from cybersecurity threats. But this decision, I have to say, is probably the darkest day in our four decades in Britain.”
Walking a Regulatory Minefield
The European Commission (EC) is still investigating the merger but Smith says regulators on the continent aremore open to conversations with Microsoft to find “solutions rather than reasons to block people from moving forward”.
The CMA is positioning itself as the strictest regulator in terms of tech mergers. Last year, the company stopped Meta's acquisition of Giphy, forcing the company to sell the GIF platform.
What is interesting about the latest decision is the CMA has previously suggested it was happy with Microsoft's concessions. One of the main concerns about the acquisition was Microsoft taking control of the Call of Duty franchise. While Activision Blizzard has other major brands, such as Diablo, Warcraft, and Candy Crush, Call of Duty is the all-conquering game-changer in this deal.
Sony – a critic of the deal – claimed Microsoft would make Call of Duty exclusive to Xbox and the Game Pass service. Regulators such as the CMA, European Commission (EC), and Federal Trade Commission (FTC) shared those concerns.
However, Microsoft has responded by striking 10-year agreements with Nintendo, GeForce Now, Boosteroid, EE in the UK, and others that will keep Call of Duty available across platforms. The company has said that Sony has a similar deal on the table. Sony's response was to suggest Microsoft would sabotage Call of Duty – which the company deems irreplaceable – on PlayStation.
Prime Minister Rishi Sunak Hits Back
Following Smith's comments, UK Prime Minister Rishi Sunak responded by defending the UK and positing the country as tech-friendly compared to Europe:
“More broadly, those sorts of claims are not borne out by the facts. The UK's games market is rapidly growing. It's doubled in size over the past decade to its current value of £7bn in 2022.
Last year the UK became the third country in the world to have a tech sector valued at one trillion dollars (£802bn). That's behind only China and the United States in terms of investment, and the first in Europe by some distance.
We continue to believe, as I set out, that the UK has an extremely attractive tech sector and a growing gains market. We will continue to engage proactively with Microsoft and other companies. That won't change.”