KitGuru Games: Microsoft’s Activision Blizzard acquisition has turned into a political circus

At this point, many countries across the globe have approved Microsoft's planned acquisition of Activision Blizzard, including the European Commission, which worked with Microsoft on remedies to ensure continued access to Activision games for cloud gaming providers big and small all across the world, not just in Europe. However, the CMA is standing firm on its decision to block the deal, which is now drawing criticism from UK politicians. Microsoft CEO, Satya Nadella, was recently asked whether the company would consider pulling products from the UK market.

Typically, it would be inconceivable to see a major company like Microsoft withdrawing from the UK and the idea would be shot down immediately. However, against the backdrop of the political landscape and the UK's struggling economy, Microsoft does have an opportunity to throw its weight around a bit here and we've seen the company take that opportunity. After the CMA initially announced its decision to block, based on cloud gaming market concerns, Activision and Microsoft execs claimed that it was a sign that the UK is “closed for business” for tech companies. Now, Microsoft's CEO, Satya Nadella, is dangling the possibility of major changes to its presence in the UK.

In an interview with CNBC, Nadella was asked “Could you ever see an age where you sell the product in the US if it was approved, sell the product in Europe, but not sell it in the UK if they did not approve it?”. Nadella replied with a smile, saying “Let's wait for it all to play out”.

If Microsoft is able to get the deal approved everywhere except for the UK, then Microsoft could theoretically make some major changes. The company currently has a huge presence in the UK, having not just its own offices with thousands of employees, but also a number of UK-based game studios under its wing. Decreasing investment in the UK and moving over to Europe would be a major blow to the UK and hurt the current government's desire to transform the country into a Silicon Valley-style tech hub. The UK has already suffered a blow in this area, as the country's biggest and most relevant chip maker, ARM, rejected offers to list on the London Stock Exchange after its deal to be acquired by Nvidia fell through. Instead, ARM is set to be listed on the US stock exchange.

Following the EU's approval of the acquisition, Activision confirmed plans to expand its investment across its European studios. In a post-Brexit world, the UK is directly competing with the EU for investment exactly like this and alarm bells have begun ringing in politicians' ears. Recently, UK Prime Minister, Rishi Sunak, posted on LinkedIn directly addressing the CMA, expressing a desire to “steer” the regulator's direction. UK Chancellor, Jeremy Hunt, also told Reuters in an interview this week that he thinks it is “important all our regulators understand their wider responsibilities for economic growth”, directly referring to the ongoing situation with Microsoft and Activision.

It is worth noting for non-UK readers that this comes at a time when the UK economy is struggling and there are many more pressing issues that the government should be spending its time on, such as food shortages, energy prices and inflation. As a Brit myself, I feel that far more citizens care about whether or not they'll be able to cook a roast dinner next Sunday than whether or not this acquisition goes through. The fact of the matter is though, the CMA's decision here could indeed have a negative impact on the economy and its flimsy arguments against it could reflect poorly on the country in enterprising circles.

As analyst Florian Mueller points out, the acquisition has already been approved in 37 countries with a total population count 14 times higher than the UK's and with an aggregate GDP that is far higher than the UK's as well. That's a tough market proposition for Microsoft to give up on.

The CMA isn't the only regulator opposing the deal, the FTC in the US is also suing to block it but the key difference is that in the US, the FTC needs to get a court-ordered injunction and fight to block a case in a court of law. The FTC has lost many cases this way and the general consensus is that Microsoft has a good chance to beat the lawsuit. Here in the UK, the CMA is allowed to make its own decisions as an independent entity without oversight from an actual court.

Microsoft is set to appeal the CMA's ruling, which will go to a tribunal that can then direct the CMA to correct course if a successful argument is made. Given that the CMA made a number of errors in its calculations, such as counting all Game Pass subscribers as XCloud users and significantly overstating Microsoft's market share in cloud gaming, it will be interesting to see how the appeal plays out.

KitGuru Says: When I first heard that Microsoft was acquiring Activision Blizzard, at no point did I think I would be writing articles about the UK economy and high-ranking politicians, yet here we are. Hopefully, this appeal situation and the FTC case can have a quick turnaround, no matter what the outcome is, so we can get back to talking about actual video games once again.

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