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It was, in fairness, a good line. The boss of Activision Blizzard, in full campaigning mode in support of the gaming group’s $75bn sale to Microsoft, last month noted UK prime minister Rishi Sunak’s ambitions to become a European tech hub and quipped: “If deals like this can’t get through, they won’t be Silicon Valley, they’ll be Death Valley.” 

It also was a little odd. The deal, amid concerns that ownership of the blockbuster Call of Duty franchise could dull competition between Microsoft’s Xbox console and rivals such as Sony’s PlayStation, is mired in antitrust problems the world over. The Federal Trade Commission sued to block the transaction in December. The European Commission is examining the deal, and potential remedies offered by Microsoft, ahead of a decision expected in April.

Why did the Competition and Markets Authority attract Bobby Kotick’s ire? The UK regulator provisionally concluded in February that, after an in-depth investigation, the deal could mean higher prices and less choice for the UK’s 45mn gamers. The tech giants must persuade the watchdog that behavioural solutions such as licensing deals with its rivals can alleviate concerns, ahead of a final decision next month. 

Kotick isn’t wrong that the UK has become a tougher place to do deals. New national security vetting rules are being used rather more expansively and less predictably than was either promised or hoped. On antitrust, the CMA has taken back control over big, global deals that would have previously been judged in Europe. Companies and advisors are trying to read the regulatory tea leaves on the basis of limited case history. And the trend is clear: Linklaters puts the proportion of deals prohibited, unwound or pulled after second-phase CMA investigations in recent years at double that from 2014 to 2017.

This is partly a global phenomenon, particularly in tech. New CMA boss Sarah Cardell talked recently about its shift after a pair of UK reports in 2019 found “historic under-enforcement” in scrutinising the digital platforms. Greater global focus on less well-trodden areas such as dynamic or potential future competition concerns, and on vertical deals between companies buying from or selling to each other such as Microsoft’s, mean less predictable decision-making, and less consistency in outcomes between different regulators. 

One issue for Microsoft and Activision is the CMA’s reputed scepticism of the types of behavioural remedies the companies are offering as mitigation. Cardell’s recent speech seemed an attempt to counter criticism that the UK regulator hasn’t always signposted what it was doing and why. But she argued these commitments can become ineffective as markets evolve and can be “very challenging” to monitor. If anything, says Stephen Whitfield at Travers Smith, this “reinforced the message that the UK has a different way of thinking about behavioural remedies to Europe”.

Another is that the UK regulator perhaps has more scope to act as Grim Reaper to Big Tech, even when its peers might want to play executioner. American dealmakers (who broadly distrust any system other than their own) can and do beat the regulators in court. In the UK’s administrative system, the decision rests with the CMA with appeals via judicial review decided on the fairness of the process, rather than the full merits of the case. (The quid pro quo, argue UK regulatory types, is an extensive, objective investigation, including an independent assessment at the second stage.)

The UK’s growing number of tech start-ups, who generally want some protection from big tech while reserving their God-given right to sell out to them, may disagree with the Kotick assessment. After considerable angst in recent years, notably after the regulator in 2021 blocked the merger of two UK equity crowdfunding start-ups Seedrs and Crowdcube, UK start-up body Coadec has welcomed the prospect of the CMA’s new digital markets unit, once seen as a threat to the sector. The hope is that it can better balance concerns around fostering innovation and containing incumbents. 

Death Valley for some? Perhaps. But the view from Silicon Roundabout seems to be that the main problem with the government’s tech ambitions is that they are policy-lite, not enforcement-heavy.

helen.thomas@ft.com

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