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Microsoft attacks ‘irrational’ decision to block £55bn Activision merger

FILE PHOTO: Microsoft logo is seen on a smartphone placed on displayed Activision Blizzard logo in this illustration taken January 18, 2022. REUTERS/Dado Ruvic/Illustration/File Photo - REUTERS/Dado Ruvic
FILE PHOTO: Microsoft logo is seen on a smartphone placed on displayed Activision Blizzard logo in this illustration taken January 18, 2022. REUTERS/Dado Ruvic/Illustration/File Photo - REUTERS/Dado Ruvic

Microsoft has accused Britain’s competition authority of “irrationally” blocking its £55bn takeover of the Call of Duty video game maker Activision.

In its appeal to the Competition and Market Authority’s (CMA) decision, Microsoft, which makes the Xbox games console, accused the regulator of making “fundamental errors”.

Microsoft said in its filing with the Competition Appeal Tribunal that the CMA had not taken “proper account of three long term commercial agreements which [Microsoft] had entered into” with cloud gaming companies. Microsoft has announced several decade-long deals with gaming companies to ensure their access to Call of Duty.

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The CMA blocked Microsoft’s takeover of Activision in April, arguing it would stifle competition in the growing market for streaming video games.

Following the decision, Microsoft president Brad Smith hit out at the regulator and claimed the move sent a “clear message” that the EU was a more attractive place to start a business than Britain.

Meanwhile Activision, which also makes the mobile game Candy Crush, accused the UK of being “closed for business”.

Since the CMA halted the merger, European officials have given the deal the green light. Sources in Brussels dismissed British concerns about the so-called cloud gaming market, arguing it accounts for a tiny fraction of the video games sector.

FILE - Microsoft President Brad Smith addresses a media conference regarding Microsoft's acquisition of Activision Blizzard and the future of gaming in Brussels, on Feb. 21, 2023. The European Union on Monday approved Microsoft’s $69 billion purchase of video game maker Activision Blizzard, deciding the deal won’t stifle competition for popular console titles like Call of Duty and accepting the U.S. tech company’s remedies to boost competition in cloud gaming. (AP Photo/Virginia Mayo, File) - Virginia Mayo/AP

The call by regulators to block the deal has also sparked pushback from politicians. Jeremy Hunt, the Chancellor, said he felt regulators needed to “understand their wider responsibilities for economic growth” after the deal was blocked.

It comes amid fears that tech businesses are turning away from the UK despite government efforts to unleash a new “Silicon Valley” in Britain. Revolut, the fintech giant, has said it would seek to go public in the US after struggling to secure a UK banking licence, while chip designer Arm has snubbed the City to float in New York.

Writing in the Telegraph last week, Marcus Bokkerink, chairman of the CMA, said he “fundamentally disagreed” with claims it was discouraging investment by blocking the takeover.

He said: “If we allow entrenched market power to grow, we all suffer.”

In a filing with the tribunal, Microsoft said the CMA’s decision was wrong because it had failed to take into account a series of long-term commitments the tech giant had made with rival console makers to maintain their access to Call of Duty.

Microsoft’s takeover of Activision had been opposed by Sony, which makes the Playstation, over fears it would cut it off from access to Call of Duty. Microsoft argued the CMA had not taken on board evidence that it had no incentive to block its rival and that it had been “disproportionate” in its decision to ban the takeover.

A CMA spokesman said: “We prohibited this deal as we had concerns that it would reduce innovation and choice in the cloud gaming market in the UK. We will defend our position in court.”