Big Tech Merger Control: A Good Move To Restrict Competition Or An Obstacle To Innovation?
According to Linklaters research, 64% of merger exposed to an in-depth investigation have failed in the previous three and a half years, compared to 34% of deals scrutinised by the CMA between 2014 and 2017.
British regulators have denied Microsoft’s USD 69 billion mergers with video game producer Activision Blizzard because they are worried about limiting competition in the cloud gaming business. The CMA (Competition and Markets Authority) said in its final assessment that the only feasible solution to the deal’s loss of competition is to ban the Merger. The all-cash Merger was expected to be the largest in the history of the technology sector.
UK’s this surprising move to halt Microsoft Corp’s $69 billion Activision Blizzard Inc. merger demonstrates a more forceful approach to contract enforcement that has emerged since Brexit.
The final decision reduces Microsoft’s prospects of getting the world’s largest gaming buyout. It places the Competition and Markets Authority at the centre of global antitrust alongside the United States and the European Union. The judgement is internationally binding, and the path to acceptance appears difficult. It’s the CMA’s second, but by far the largest, Big Tech tie-up following the rejection of Meta Platforms Inc.’s bid to acquire GIF search engine Giphy.
However, it faces significant opposition from competitor Sony. It is being probed by authorities in the United States and Europe amid concerns that it will give Microsoft control over famous gaming titles such as Call of Duty. Microsoft expressed disappointment but indicated that it was not ready to give up.
They are completely committed to the purchase and will appeal, said President Brad Smith in a statement. According to him, the UK watchdog’s judgement ignores a realistic approach to addressing competition issues and hinders digital innovation and investment in the UK. They are particularly upset that, after extensive consideration, this choice appears to represent a faulty knowledge of this sector and the way the key cloud technology actually works. Activision also responded, stating it will work hard with Microsoft to overturn the decision on appeal.
The CMA’s trust in its merger system has prompted concerns that the regulator has grown overly aggressive, potentially discouraging multinational enterprises. Microsoft and Activision executives also slammed the decision as harmful to business and investment in the UK.
According to an Activision representative, the CMA analysis contradicts the UK’s goals to become an attractive place to create digital enterprises. Global innovators of all sizes will notice that, despite its rhetoric, the UK is obviously closed for business.
According to Linklaters research, 64% of acquisitions exposed to an in-depth investigation have failed in the previous three and a half years, compared to 34% of deals scrutinised by the CMA between 2014 and 2017.
These choices have cut through accusations that it hasn’t done enough in the past to deal with emerging digital businesses being scooped up by a few giant firms. Failed attempts that may have resulted in Meta’s takeover of Whatsapp and Instagram. In yet another display of post-Brexit strength, the UK proposed new rules to parliament this week that will strengthen its ability to curb digital dominance and benefit the country’s consumers. It contains new digital competition laws and regulations that would identify a small number of IT firms as having “strategic market status.”
The most effective method to protect competition, according to Sarah Cardell, chief executive officer of the CMA, is to prevent the emergence of entrenched market dominance in the first place. Merger control thus plays an important role in increasing productivity and growth in the UK. Cardell refuted the criticism, claiming that accusations that the agency is overly interventionist are unfounded and that it is only doing its duty to safeguard the UK. She claims that just a few of the 12 to 14 agreements referred to an in-depth investigation from hundreds each year are banned.
According to Anne Witt, a legal professor at EDHEC Business School, the CMA is assuming the lead in Big Tech merger control. If the CMA succeeds, it will set a precedent and send a strong message to the Big Tech industry that times are changing and the days of unrestricted acquisition sprees are over.
Disclosure.
For the time being, all eyes are on what the European Commission will do next month and how Microsoft will defend itself before the UK’s Competition Appeal Tribunal – a battle that will last months. In merger inquiry reviews, the CAT also seldom rules against the watchdog.
