The CMA bares its teeth at Microsoft and Activision

Hats off to the Competition and Markets Authority’s Sarah Cardell.

The watchdog’s boss took on the might of Microsoft by blocking its original £60billion bid for Activision Blizzard, provoking a barrage of gratuitous criticism from the US tech giant.

Microsoft’s president, Brad Smith, went as far as branding the UK regulator an outlier, even suggesting that start-ups are better off in the EU than the UK.

Call Of Duty-maker Activision’s chief branded the CMA a tool of the US regulator, the Federal Trade Commission.

But Cardell stuck to her guns, claiming the American computing giant would gain too much control of the nascent cloud gaming market, and that the merger would damage competition and stifle innovation, leaving less choice for gamers.

Microsoft kept trying, hoping Cardell would roll-over. It made several attempts to stitch together a new deal, including one to accept binding commitments by the European Commission, and a licensing deal between itself and Sony. But this didn’t wash with the regulator either.

A feisty former lawyer, Cardell made it clear again yesterday, ahead of the formal deadline, that she would still veto the original bid as announced in April.

Her intransigence has worked, forcing Microsoft and Activision to come up with a revised takeover, which was also announced yesterday.

Under Microsoft’s new deal – arranged so that it addresses the CMA’s concerns – the tech giant will not be able to release Activision games like Overwatch and Diablo exclusively on Xbox Cloud Gaming, its own cloud streaming service, or to exclusively control the licensing terms for rival services.

Instead, Microsoft is selling these cloud streaming rights for Activision’s existing PC and console games – and any games released over the next 15 years – to French gaming rival Ubisoft.

These terms will apply around the world but not in Europe – more specifically the European Economic Area (EEA) – as Brussels had already accepted the original deal.

All this may sound rather technical but they are important criteria because, as the CMA pointed out, cloud gaming is a dramatically changing market.

Cardell’s determination to take on Microsoft has put the UK in the lead in the global fight to control big tech 

If the deal had gone ahead as intended, the combined group would have an effective monopoly. Microsoft has always denied this, arguing instead that the merged group would open up the market, which is becoming more competitive as gaming groups offer subscriber-based streaming services.

Clearly the CMA did not buy this interpretation. By making its concessions, Microsoft has accepted the criticism and would not have put together this latest deal if it didn’t believe the CMA would accept the terms.

Microsoft’s Smith may have been right that the CMA is an outlier after all. But the right sort. Now that the UK is out of the EU, it is the CMA which is deciding on some of the world’s biggest cross-border mergers rather than Brussels.

And Cardell’s determination to take on Microsoft has put the UK in the lead in the global fight to control big tech.

It also shows that having a tough cookie like her as leader, it is possible for watchdogs to snarl and bare their teeth.

And bite deep.

Come back Arm

Arm has started the listing process to float on New York’s Nasdaq exchange in what will be one of the biggest IPOs for years. 

Without question, the decision by the Cambridge-based chip designer not to float on the London Stock Exchange, despite much arm wrestling from Rishi Sunak and other City figures, is one of great regret.

Yet Arm’s decision is understandable and rational. Being listed on the technology-heavy Nasdaq, Arm’s shares will be rated alongside its peers, and liquidity will be deeper. But Arm has also intimated that at some stage it would consider a secondary listing in London. This makes sense.

So what’s stopping it? Well, as the rules stand, Arm could go directly to the ‘standard sector’ without more form filling.

However, if Arm wanted to join the FTSE 100, it would have to apply for the premium segment, which means complying with the FCA’s listing requirements – expensive and onerous. 

In efforts to improve London’s attractiveness, the FCA in its recent Primary Markets Effectiveness Review has proposed putting the two segments together. This would allow foreign-listed companies to apply more cheaply and easily.

So please FCA, hurry up and make these changes quickly so Arm can return to the FTSE 100 where it belongs.