17 May 2023

When it comes to tech – the EU is now more pro-growth than the UK


For those who believed Brexit would usher in a new era of unleashed technological innovation, events this week are cause to reconsider.

At the end of last month the British Competition and Markets Authority (CMA) blocked Microsoft’s £55bn acquisition of Activision Blizzard. Now, competition officials from the European Commission (EC) have allowed the acquisition to go ahead. Not for the first time in recent history, the EU has sent stronger pro-innovation and pro-growth signals to the technology industry than the UK has.

One of the CMA’s main concerns about the acquisition was its effect on the cloud gaming market. According to the regulator, online gaming would become less competitive and innovative as a result of the merger.

For the non-gamers out there, cloud gaming allows gamers to play games that are stored remotely, rather than on a games console. One of the concerns regulators around the world have cited is that Microsoft could limit access to popular Activision series such as Call of Duty to Microsoft platforms such as Xbox consoles. At the moment, gamers can choose to play Call of Duty games either on an Xbox, or on Sony’s Playstation.

Microsoft had sought to alleviate this concern by offering a royalty-free licence for Call of Duty, World of Warcraft, and other popular Activision games to some cloud gaming providers for a 10-year period. The CMA was not convinced.

The EU, on the other hand, accepted Microsoft’s proposed remedy. According to the EU’s competition commissioner Margrethe Vestager: ‘The commitments offered by Microsoft will enable for the first time the streaming of such games in any cloud game streaming services, enhancing competition and opportunities for growth’. The EC also released a statement saying that: ‘Even if Microsoft did decide to withdraw Activision’s games from the PlayStation, this would not significantly harm competition in the consoles market’.

Vestager’s comments and the EC statements reveal an understanding of the markets at issue that the CMA has unfortunately overlooked. Market dominance is not the same thing as a monopoly position, and mergers and acquisitions can prompt innovation as competitors seek to make themselves attractive to other market players. Playstation and Nintendo would not react to the Microsoft acquisition of Activision by continuing as if nothing had happened. An acquisition of that size would prompt more competition among video game designers, console manufacturers, and others. The video game industry is not static, despite what the CMA decision suggests.

Unfortunately for Microsoft, the EC’s decision is of limited reassurance. It can only appeal the CMA decision on narrow grounds, and if the CMA decision is upheld it may have to abandon the Activision acquisition, despite the good news from Europe. Exiting the UK or separating British gamers from EU customers or leaving the UK would be an arduous and costly procedure. 

That one of the world’s most iconic technology companies might soon be in the position of having to considering an exit from the UK is a shame, even if a departure is unlikely. But it is not a surprise. As I have noted previously, the CMA’s treatment of Microsoft is only the latest example of British regulators and lawmakers sending strong ‘Do Not Enter’ signals to the global technology community. If we carry on in this vein, the result will not just be unhappy gamers, but a less prosperous country.

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Matthew Feeney is Head of Tech at the Centre for Policy Studies.