Yahoo Finance Brussels locked in row with Britain over £55bn Microsoft gaming deal
Brussels is locked in a row with British regulators after waving through a $69bn (£55bn) video game takeover by Microsoft that had been blocked in the UK.
The European Commission approved Microsoft's deal to buy Call of Duty maker Activision Blizzard on Monday after concluding that competition fears were not enough to justify halting the tie-up.
It contradicts a ruling last month by the UK's Competition and Markets Authority (CMA), which blocked the deal and said it would harm consumers in the growing market for cloud gaming, where games are streamed over the internet rather than relying on powerful hardware in a console or PC.
In response, the CMA issued an unusual statement defending its decision and suggesting the Commission was wrong not to act.
Sarah Cardell, chief executive, said: “The UK, US and European competition authorities are unanimous that this merger would harm competition in cloud gaming.
“Microsoft’s proposals, accepted by the European Commission today, would allow Microsoft to set the terms and conditions for this market for the next ten years. They would replace a free, open and competitive market with one subject to ongoing regulation of the games Microsoft sells, the platforms to which it sells them, and the conditions of sale.
“While we recognise and respect that the European Commission is entitled to take a different view, the CMA stands by its decision.”
EU vice president Margrethe Vestager hailed her officials’ decision on Monday as “an important step” for the bloc, saying:
“Video games attract billions of users all over the world. In such a fast-growing and dynamic industry, it is crucial to protect competition and innovation.
“Our decision represents an important step in this direction, by bringing Activision’s popular games to many more devices and consumers than before thanks to cloud game streaming.”
A Brussels spokesman added that the Commission had “based its decision on hard evidence and on extensive information and feedback”, while sources dismissed the UK's concerns about cloud gaming, saying that it accounted for just 1pc to 2pc of the overall market and any potential competition impact was therefore not significant.
The takeover has been politically charged since the CMA intervention, which triggered a warning from Activision that Britain was “closed for business”.=
Brad Smith, Microsoft's president, said at the time that the intervention showed that the EU was a more attractive location than the UK.
The takeover needed approval from both EU and UK regulators to go ahead, meaning that the CMA's decision has effectively killed it unless it is overturned on appeal. The US Federal Trade Commission is also suing Microsoft to block the deal.
Bobby Kotick, chief executive of Activision, strongly hinted on Monday that his company would now expand into EU countries instead of Britain.
Mr Kotick said: “We intend to meaningfully expand our investment and workforce throughout the EU, and we’re excited for the benefits our transaction brings to players in Europe and around the world.”
Lulu Cheng Meservey, chief communications officer at Activision, praised the EU's “firm yet pragmatic, unbiased, and fact-driven approach to regulation”.
British officials rallied to defend the CMA. A government spokesman said: “Every major competition authority – including in the EU and the US – agrees this merger would harm competition.”
“The UK has the biggest tech sector in Europe and the third largest globally valued at $1tn, demonstrating the UK is open for business and an attractive place to invest.”
UK competition officials said in April that Microsoft has a 60-70pc share of the cloud gaming market, adding that this number doubled over the past year.
Activision’s share price crashed after the CMA decision was announced, while Monday’s decision saw little significant movement for either company. The Call of Duty publisher has said it is working “aggressively with Microsoft to reverse this on appeal”.
A spokesman said at the time: “The report’s conclusions are a disservice to UK citizens, who face increasingly dire economic prospects.”
Both companies are understood to be taking a legal case against the CMA to Britain’s Competition Appeal Tribunal.
