UK alone with Microsoft monopoly angst


Louise Cresswell investigates how the blocking of the planned Microsoft-Activision merger by UK regulators has raised questions about the UK's competitiveness.

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By Louise Cresswell

Despite being blocked by competition authorities in both the US and UK, Microsoft’s proposed merger with Activision-Blizzard has been given the green light by the European Union following endorsement from a number of other nations, including Saudi Arabia, Brazil, and South Africa. Fraught with a range of controversies from the offset, the proposal has raised significant questions about the role of competition regulation in growing industries and the UK’s general economic competitiveness.

Activision-Blizzard is an Ameri-can game developer that produces a number of world-famous titles, including Call of Duty, World of Warcraft, Overwatch, and Candy Crush Saga. Despite the continued success of these franchises, the company’s value started to plummet following a lengthy and high-profile legal battle with the state of California over a series of allegations of sexual harassment and employee discrimination disputes.

With Activision-Blizzard shed-ding sponsors by the day, Microsoft saw a prime opportunity to encompass a key competitor and proposed a 69 billion USD takeover, but its plans have not gone unchallenged.

Sony, the incumbent market leader, argues that the deal gives Microsoft the power to make the Call of Duty franchise an Xbox exclusive, effectively relegating Sony’s PlayStation console to the family-friendly market currently occupied by the Nintendo Switch. The Competition Market Authority (CMA) concurs, also noting that the merger would allow Micro-soft to unfairly dominate the cloud gaming industry. Cloud gaming is increasingly being seen as the future of the industry, as it would allow players to buy games without storage being an issue, and play them at a high quality without needing to own first-rate hardware.

Industry concerns have spilled over into the political sphere. Rishi Sunak is keen to make Britain the hub for technological development in Eu-rope, and Chancellor of the Exchequer Jeremy Hunt has criticised the CMA for stifling economic growth by preventing Microsoft and Activision-Blizzard from operating within the UK under a unified banner. In what could be an attempt to apply some political weight to Microsoft and Activision-Blizzard’s upcoming ap-peal, Microsoft President Brad Smith alluded to a Conservative Party sore spot when he told the BBC that “this decision is probably the darkest day in (Microsoft’s) four decades in Britain... the European Union is a more attractive place to start a business than the United Kingdom.”

Tense debate within the formerly niche market is now reflective of broader ideological concerns about Western economics. The merger has brought 1970s theories of ‘late stage capitalism’ – an era defined by mass consumption, transnational corporations, globalised markets and labour, and speculative capital – front and centre to contemporary political dis-course. Microsoft is already a trillion-dollar company, the number one soft-ware provider globally, and the most highly valued publicly traded company in the world. Merging with Activision-Blizzard would elevate them to become the third biggest company in the video game market, and giving them extensive control over the cloud gaming sector too.

In an attempt to dominate a sec-tor that is predicted to be worth 40billion USD by 2030, Microsoft has incorporated its only significant independent competitor into its holdings by taking advantage of their failure to provide for their workforce to an ad-equate legal standard. This fits with what one would expect from a capitalist enterprise with the size and standing of Microsoft.

However, it is also true that monopolies are most common, and most difficult to overcome, within the technology sector. Recently, Meta’s acquisition of Instagram and WhatsApp went largely unquestioned by competition watchdogs, considerably raising the barriers for market entry for new social media companies. Technology companies have vastly benefitted from the limited technical expertise of the government bodies that regulate them, and the unwillingness of these bodies to predict the size, value and influence that burgeoning forms of technology may wield in the future. The CMA’s unprecedented block of this merger is their attempt to buck this trend, so the Microsoft-Activision-Blizzard case may prove the bellwether for a long series of corporate conflicts to come. Regardless of the outcome, it is time for regulators in tech to tackle the consequences of decades of institutional naivete.