23 February 2024 5:41 PM
Microsoft's vice chair and president Brad Smith (pictured) has hit out after the software firm's takeover of gaming company Activision Blizzard was blocked by the UK competition watchdog

The furious boss of Microsoft has warned Rishi Sunak it was a ‘bad day for Britain’ after the UK competition watchdog blocked its takeover of Activision Blizzard.

Microsoft’s vice chair and president Brad Smith hit out after the Competition and Markets Authority stopped the US firm’s £55billion buyout of the gaming company.

Mr Smith also compared the regulatory environment unfavourably with the EU and warned the ‘English Channel has never seemed wider’.

Following the potentially fatal blow to one of the technology industry’s biggest ever deals, Mr Smith told BBC Radio 4’s Today programme he was ‘very disappointed.

He said: ‘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.

Microsoft’s vice chair and president Brad Smith (pictured) has hit out after the software firm’s takeover of gaming company Activision Blizzard was blocked by the UK competition watchdog

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The CMA’s decision was announced on the same day Prime Minister Rishi Sunak attended a reception for representatives of the video games industry at 10 Downing Street yesterday

‘I think it leaves people worried and it leaves people thinking that actually the process in Brussels worked far better than what we’re now addressing in London.

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ANALYSIS: There’s no guarantee that the CMA will bend, but a compromise is possible

By SOPHIE LUND-YATES

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Microsoft’s long awaited strategic acquisition of game-maker Activision Blizzard has come under pressure from authorities once again. 

The CMA has concerns that the deal could undermine fair competition in cloud gaming if the Xbox maker decides to make Activision’s games exclusive to its cloud gaming platform. 

Cutting alternative distribution off at the knees is seen as a step too far for the UK authorities. 

Scepticism among shareholders about the proposed takeover was already rife, the CMA is not the only regulatory body to be sniffing around the deal. 

Microsoft has plenty of financial resource to appeal the decision, with over $50billion of net cash languishing on the balance sheet.

There’s no guarantee that the CMA will bend on this one, but a compromise is possible. 

This could see Microsoft take on some areas of Activision and not others, but ultimately the final shape of the deal is hard to map. 

Microsoft needs this deal to help stoke growth in the wake of disappointing personal computer sales, with the gaming market a far more high-growth area, which would supplement the group’s leading AI position. 

Activision’s incredible haul of intellectual property is a big factor in this situation, but more broadly, as cloud gaming continues to grow and regulators learn as they go, tougher regulations and frustrating corporate outcomes are likely.

Sophie Lund-Yates is lead equity analyst at Hargreaves Lansdown 

‘Microsoft has been in the United Kingdom for years and we play a vital role not just supporting businesses and non-profits, but even defending the nation from cybersecurity threats.

‘This decision, I have to say, is probably the darkest day in our four decades in Britain. It does more than shake our confidence in the future of the opportunity to grow a technology business in Britain than we’ve ever confronted before.’

The CMA said it had prevented the purchase over concerns in the cloud gaming sector.

Xbox owner Microsoft struck a deal to buy the maker of Candy Crush and Call Of Duty in January 2022.

Microsoft and Activision have both said they will appeal the decision.

And Mr Smith said he had hoped a post-Brexit Britain would have a more flexible regulatory environment.

He said: ‘I think investments flow to places where people have confidence in the way laws and regulations work, and for all of us who had some hope that, post-Brexit, the UK would construct a structure that would even be more flexible, that would be better for investment, better for technology, we’re now finding the opposite appears to be true.

‘I would like innovation to go forward with appropriate guardrails, but the guardrails need to allow innovation to advance.

‘One of the ways that innovation advances is that companies are born and then they have the opportunity to merge and come together. That’s how business around the world tends to flourish.

‘I don’t think people are going to want to start a company in a country and will then have regulators who will stop them from selling it to another company if the day arrives.

‘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 than the United Kingdom.’

Delivering a message to Prime Minister Mr Sunak, Mr Smith said: ‘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 is not only going to flourish, but be created, then it needs to look hard at the role of the CMA, this regulatory structure in the United Kingdom, this transaction and the message that the United Kingdom has just sent to the world.

‘Because I can tell you that while I may have a point of view that is based in part on an interest that our company has, I have already heard from a great many around the world.

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Microsoft and Activision, which makes Call of Duty, have both said they will appeal the move

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The Call of Duty series (pictured) is one of Activision Blizzard’s most iconic titles

‘People are shocked, people are disappointed and people’s confidence in technology in the United Kingdom has been severely shaken.’

The CMA’s decision was announced on the same day Mr Sunak attended a reception for representatives of the video games industry at 10 Downing Street. 

Activision, which also makes the Crash Bandicoot and Spyro games, said it will ‘reassess our growth plans for the UK’ as a result of the CMA’s move.

The CMA argued that the groups failed to address its worries over protecting innovation in the fast-growing cloud gaming market.

The watchdog said the move will make Microsoft stronger in cloud gaming – where video games are played using remote servers and have no need for downloads – ‘stifling competition in this growing market’.

It claimed that Microsoft already accounts for between 60 per cent and 70 per cent of cloud gaming services.

Microsoft submitted a proposal in an effort to address concerns but the regulator said this contained a ‘number of significant shortcomings’.

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Activision Blizzard also has the mobile game Candy Crush under its umbrella

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World of Warcraft is another popular game produced by Activision Blizzard

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Martin Coleman, chair of the independent panel of experts conducting the CMA investigation, said: ‘Microsoft already enjoys a powerful position and head start over other competitors in cloud gaming and this deal would strengthen that advantage, giving it the ability to undermine new and innovative competitors.

‘Microsoft engaged constructively with us to try to address these issues and we are grateful for that, but their proposals were not effective to remedy our concerns and would have replaced competition with ineffective regulation in a new and dynamic market.’

A spokeswoman for Activision Blizzard said: ‘The CMA’s report contradicts the ambitions of the UK to become an attractive country to build technology businesses.

‘We will work aggressively with Microsoft to reverse this on appeal. The report’s conclusions are a disservice to UK citizens, who face increasingly dire economic prospects.

‘We will reassess our growth plans for the UK. Global innovators large and small will take note that – despite all its rhetoric – the UK is clearly closed for business.’

Source : https://www.dailymail.co.uk/news/article-12019417/Furious-Microsoft-boss-warns-Rishi-Sunak-bad-day-Britain.html?ns_mchannel=rss&ito=1490&ns_campaign=1490&rand=1270

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