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Microsoft president Brad Smith has spoken out to criticize the UK’s regulatory body that announced it would block the Xbox company’s proposed buyout of Activision Blizzard for $68.7 billion. Speaking to the BBC, Smith said the decision represents the “darkest day” in Microsoft’s 40-plus years in Britain. Smith also brought up Brexit, which is when the UK left the European Union in 2020. He said UK regulators are unelected and unaccountable, while leaders in the EU are more willing to come to the table and have a dialogue to help get a deal done. The head of the CMA responded to Smith’s comments and disagreed on a number of points.
“We are of course very disappointed about the CMA’s decision but more than that, unfortunately I think it’s bad for Britain,” Smith said, noting that he has an obvious bias in this matter as he represents Microsoft and wants the deal to happen. “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. And I think in that sense, the impact of this decision is far broader than on Microsoft or this acquisition alone.”
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Asked about the impact on the UK of this deal breaking down, Smith said it shakes the confidence of the business community, and it also calls into question the leadership of the CMA.
The CMA ruled against the deal over concerns not about Call of Duty or console exclusivity, but mainly about cloud gaming. Smith said the CMA’s argument came from a “flawed and faulty understanding of the market,” and that it’s based on a “potential concern” instead of a real one.
Smith said the cloud gaming market in the UK right now is “so small,” adding that Microsoft’s server network in the UK doesn’t allow for more than 5,000 concurrent users.
“And so for regulators to step in and seek to torpedo a $68 billion global transaction out of a concern about a part of the business that is so small and to reject so many proposals to try to address their concerns, 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,” he said.
Microsoft has been doing business in the UK for 40 years, working with profit and non-profit companies, as well as helping the government in various capacities. But based on this decision by the CMA, Microsoft said it doesn’t see as bright a future in the UK as it may have before.
“This decision, I have to say, is probably the darkest day in our four decades in Britain. It does more to shake our confidence in the future of the opportunity to grow a technology business in Britain than we’ve ever confronted before,” Smith said.
Smith went on to say that he thought Microsoft answered every question from the CMA panel and told the group that if it had any further questions, it should reach out. However, Smith claims the CMA panel “went silent.”
Smith again brought up Brussels, the capital of the EU, saying regulators there have been open to having “more of a conversation” about the pending Activision Blizzard deal. Smith went on to say that the EU is a more attractive place to do business than the UK. Asked if Smith had a message for UK prime minister Rishi Sunak, Smith said the leader should take a good look at the CMA and question whether the organization made the right decision to help the UK create investment, jobs, and technology innovation in the region.
“People are shocked people are disappointed and people’s confidence in technology in the UK has been severely shaken,” Smith said.
CMA chief executive Sarah Cardell is quoted in the piece, too, saying she disagrees with Smith on a number of points. She said she believes the UK is “absolutely open for business,” and that its decision to block the deal was made to help prevent Microsoft from continuing to grow its strong position in the cloud gaming market. Cardell said if the deal is allowed to go through, it could harm the ability for new competition and limit innovation in the cloud gaming space.
Although the CMA blocked the Activision Blizzard deal, this case is not over. Microsoft is already in the process of appealing and the deal and could offer remedies like taking Activision Blizzard games off Game Pass in the UK or keeping Game Pass prices in check over time. Beyond the UK, the EU is set to hand down a decision by May 22, and in the US, the FTC’s first evidentiary hearing is set for August 2023.
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