UK not 'closed for business' after Microsoft deal blocked, insists CMA
The competition watchdog has hit back at claims it has left Britain closed for business after Jeremy Hunt warned the watchdog to be mindful of its “wider responsibilities for economic growth”.
Marcus Bokkerink, chairman of the Competition and Markets Authority (CMA), said he “fundamentally disagreed” that it was discouraging investment by blocking Microsoft’s $69bn (£55bn) Activision takeover.
Mr Bokkerink said he had been “surprised” at the reaction to the decision, which has forced the Government to reassure companies Britain still welcomes innovative businesses.
Writing in The Telegraph (see below), Mr Bokkerink said: “If we allow entrenched market power to grow, we all suffer. Businesses who want to compete, suffer. Innovators who want to get their innovations to market, suffer. People who seek choice and continuous improvements in quality and price, suffer.
“That is why I fundamentally disagree with the suggestion that the CMA’s decision to prevent Microsoft’s acquisition of Activision means the UK is closed for business. Indeed, I was surprised some took this statement at face value.”
Mr Bokkerink’s defence of the CMA comes amid growing criticism of Britain’s regulators from technology companies after a series of setbacks.
Activision claimed that Britain was “closed for business” after the regulator blocked its takeover last month, and Microsoft’s president Brad Smith said that the EU was a better place to start a technology company than Britain.
Will Shu, the chief executive of takeaway app Deliveroo, has previously said the CMA treated him like a criminal during its investigation into a $500m investment from Amazon.
The reaction to the Microsoft decision has led to claims that the regulator is thwarting the Government’s efforts to make Britain a tech superpower.
On Wednesday, Mr Hunt told a conference that while he did not want to undermine the independence of the watchdog, “I do think it's important all our regulators understand their wider responsibilities for economic growth”.
Mr Bokkerink’s defence comes amid growing criticism that Britain has failed to encourage tech investment. The Telegraph revealed on Thursday that the Bank of England had informed the Government it planned to reject fintech giant Revolut’s banking licence application.
Executives from Revolut are expected to meet Treasury ministers in the coming weeks. A final decision on its licence is not believed to have been issued to the company.
Activision is one of the biggest gaming companies in the world and owns titles including Call of Duty, World of Warcraft and Candy Crush Saga.
The CMA blocked its takeover by Microsoft, which owns the Xbox console, warning that the deal would leave the company with a dominant position in the fast growing cloud gaming market.
This week, the European Commission approved the deal on the condition that Microsoft make Activision games available on other game streaming services.
The decision has increased the scrutiny on the CMA given the divergence by its nearest neighbour.
Mr Bokkerink said the CMA disagreed with the EU’s decision. He argued that Microsoft’s concessions “would replace a free, competitive market with one subject to new ongoing regulation of the games Microsoft sells, the platforms to which it sells them, and the conditions of sale”.
He defended regulation more widely at a time that authorities are being accused of inhibiting growth.
“Competition and contested markets can be an astonishing force for good. Good for people who get genuine choice at high quality and low prices. Good for businesses who are free to innovate, grow and reap the rewards. And good for the economy through higher productivity, innovation, business investment, job creation and real wage growth.”
Mr Bokkerink wrote: “The UK is as open for business as it has ever been thanks to its pro-competition approach.”
Microsoft has vowed to appeal against the CMA’s decision, with a challenge expected to be lodged at the Competition Appeal Tribunal within days. The US Federal Trade Commision is separately suing to block the deal.
‘The UK is as open for business as it has ever been because it is pro-competition’
By Marcus Bokkerink
From long-established multinationals to scrappy start-ups, over the past 30 years I’ve had the privilege of working with over a hundred businesses of all shapes and sizes. I helped build their customer propositions, their business models and their competitive strategies.
So when I look at the role of competition in the UK economy it is not as an economist or lawyer. It is as a businessperson.
What I learnt across that career is that competition and contested markets can be an astonishing force for good. Good for people who get genuine choice at high quality and low prices. Good for businesses who are free to innovate, grow and reap the rewards. And good for the economy through higher productivity, innovation, business investment, job creation and real wage growth.
The importance of competitive markets and the tremendously positive impact this had on investment and growth was a key motivator when I took up my role as CMA chairman. It is at the heart of our new strategy at the CMA.
If we allow entrenched market power to grow, we all suffer. Businesses who want to compete, suffer. Innovators who want to get their innovations to market, suffer. People who seek choice and continuous improvements in quality and price, suffer.
That is why I fundamentally disagree with the suggestion that the CMA’s decision to prevent Microsoft’s acquisition of Activision means the UK is closed for business. Indeed, I was surprised some took this statement at face value.
Let me recap the decision. Last month, a group of independent panel members concluded a rigorous year-long investigation into Microsoft’s proposed $69bn (£55bn) purchase of Activision. New post-Brexit powers enabled us to focus on the impact on the people and businesses of the UK.
Activision has a £700m-a-year turnover in the UK, 10 times the threshold at which we can consider looking at deals, and more than a tenth of its global turnover. Millions of UK citizens play their games and millions more will in the future. So it was very clear we needed to look at this deal.
Like both the United States and Europe, the CMA found significant competition concerns in relation to how the deal would impact the future of cloud gaming – a way of playing games more akin to TV streaming that is predicted to grow massively over the coming years.
Unlike the European Commission, the CMA concluded that Microsoft’s proposed solution would not address those concerns comprehensively and effectively. Moreover, they would replace a free, competitive market with one subject to new ongoing regulation of the games Microsoft sells, the platforms to which it sells them, and the conditions of sale. The United States Federal Trade Commission is also suing to block the deal.
Not that preventing a merger is something the CMA takes lightly. Of the thousands of mergers and acquisitions that impact the UK each year, only a handful are prohibited. Nearly all go ahead and are getting on with business, not making the news. This includes Microsoft’s purchase in 2021 of speech software firm Nuance, its second-largest acquisition.
The UK is as open for business as it has ever been thanks to its pro-competition approach.
How do we deliver that approach effectively in today’s world? One of the most effective ways to safeguard competition and innovation is to prevent the development or growth of entrenched market power in the first place. That’s where merger decisions have a critical role to play.
In other words, for the CMA the starting point is prevention, not regulation. Surely it was better to keep Sainsbury's and Asda competing against each other and other supermarkets, than to allow them to merge and have to regulate? That’s why we blocked it.
There are times when powerful businesses may wish to absorb an otherwise independent business by offering to be regulated as to how, when and where they do business. We need to be wary of this – replacing the uncertainty and vigour of competition with regulation frozen in time. It is very rare that this is good for competition, for other businesses or for consumers.
The UK has the biggest tech sector in Europe by far and one of the biggest in the world. At the heart of this are tech entrepreneurs and developing businesses working round the clock to develop and thrive. We owe it to them to ensure they can compete freely. A world in which a few powerful businesses dominate benefits no one apart from those businesses and certainly not UK tech and the UK economy.
Merger control can prevent the acquisition of market power but where that power is already entrenched and sustained regulation may be required. But it must be pro-competitive. That is why the Digital Markets, Competition and Consumers Bill that was debated in Parliament this week is so important. It ensures that any regulatory action is agile, smart, bespoke, tailored and, crucially, targeted at only those firms who wield the most market power.
Competition is not a given, it is hard work. It takes constant effort to stay ahead of competitors, to innovate, to become ever more efficient and productive. That is why some firms end up looking for shortcuts by trying to restrict, disarm or even remove their rivals. This dulling of the competitive process is something we must maintain a constant vigilance against.
Free and open competition is an unrivalled force for innovation, productivity and growth in the UK. It is the CMA’s job to ensure it remains so, and that is the job we will do.
Marcus Bokkerink is chairman of the Competition and Markets Authority
