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Competition Policy - CMA blocks Microsoft's takeover of Activision Blizzard

Graham Watson

27th April 2023

The Competition and Markets Authority (CMA) has blocked what would have been a mega-merger between Microsoft and Call of Duty maker, Activision, citing concerns about the implications of the merger for the cloud gaming market.

It is the second such move that the CMA has taken in the sector, after blocking the proposed merger between Meta and Giphy, and some are of the view that far from presenting Britain as a place to invest in technology, it's signalling the opposite and may discourage such firms from investing here.

Microsoft have given a blunt response to the CMA's decision to block its proposed merger with Activision, with President Brad Smith telling the BBC that "the move was "bad for Britain" and showed that the European Union was a better place to set up a firm than the UK".

The CMA's chief executive, Sarah Cardell responded by saying that "It is the CMA's job to do what is best for the people, businesses and economy of the UK, not merging firms with commercial interests." which strikes me as fair enough.

But if Microsoft's view becomes a commonly held one, it can't be good for Britain.

Is the UK a bad place for tech firms?

Was it feasible that the CMA's decision was appropriate from a Microeconomic perspective, in that the merger could be anti-competitive and result in a welfare loss, but that the Macroeconomic consequences, in terms of reducing inward investment, and FDI in the tech sector could be worse than this.

This article investigates this: There are some interesting bits of economics in here, not least the perception that "while Britain is a good place to start, it's a much harder place to scale up".

Nils Pratley makes the case here that the CMA decision to block the Microsoft merger with Activision Blizzard, arguing that their position doesn't reflect economic arguments, but a sense of entitlement that has developed among Big Tech firms who increasingly see themselves as beyond the jurisdiction of national competition authorities, even though the merged entities would already generate £700m revenue in the UK.

Graham Watson

Graham Watson has taught Economics for over twenty years. He contributes to tutor2u, reads voraciously and is interested in all aspects of Teaching and Learning.

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