Microsoft boss Brad Smith plays Call of Duty with government over blocked deal

No messing about from Microsoft president Brad Smith, who selected Team Deathmatch mode from the Call of Duty Modern Warfare menu and took aim at the Competition and Markets Authority for blocking his takeover of gaming firm Activision Blizzard.

It’s also sayonara to his plans to buy Tony Hawk’s Pro Skater, Sekiro, Quake, Skylander, Guitar Hero, World of Warcraft and more. Activision Blizzard has quite the roster, which is why Microsoft was pumping £55bn into acquiring it until the UK regulator intervened.

Global deals with global implications inevitably give jurisdiction to local regulators, all of which have to be satisfied.

Smith also lined up a match with the UK government; if he is to be believed, Rishi Sunak might just as well bin any thoughts of creating a new Silicon Valley around Cambridge.

“Bad for Britain,” was how Smith described the decision. The “darkest day”.

“There’s a clear message here – the European Union is a more attractive place to start a business than the United Kingdom,” he said. “The English Channel has never seemed wider.”

That’s got to hurt. It’s the sort of line that will be heard loud and clear in the circles of a government that said leaving the EU meant Britain could be buccaneering global trader capable of attracting a flood of inward investment from firms desperate to escape all of the EU’s vexatious rules.

Perhaps someone in Microsoft’s comms function was plotting ahead. “Mr Smith, sir, what you need to do here is compare the UK unfavourably with the EU and make sure you imply investment is at risk. We can still pull this one out of the bag because Rishi Sunak will crap himself when you do.”

Phones were no doubt ringing hot between Whitehall and the CMA’s headquarters after Mr Smith’s statements – even though they don’t hold up well to scrutiny.

For a start, although the EU may yet approve this deal, the European Commission’s badass competition chief Margrethe Vestager has served up a series of billion-euro fines on tech firms and has given no indication of slowing down.

If the CMA decision was a surprise, it was because markets often assume that when deals are announced “subject to regulatory approval”, the said approval is a given. Analysts didn’t bother to consider whether the deal’s critics might have had a point.

The CMA based its objections on Microsoft’s powerful position in cloud gaming - up to 70 per cent of global services with its position buttressed by an impressive infrastucture including the world’s number one operating system (Windows). It fears competition could be stymied were Activision added to an already impressive stable of horses to take on this race.

Cloud gaming might be a relative newbie on the scene but it is forecast to grow very quickly in size, outstripping sales of recorded music by 2026, for example.

Microsoft appeared to be of the view that it could simply override these objections and buy off the CMA with a banana or two. Oops. Tech analyst Enders noted: “The decision is an entirely avoidable disaster for Microsoft, and a reflection of its poor handling of the regulatory process from the outset. Microsoft will appeal, and it should, but will need a new plan to get the deal through, and new leadership to sell it.”

New leadership might realise that engaging in a game of corporate blackmail – because that’s what Smith’s comments statement might look like to the government - might not be the best way to proceed.

The CMA had better be ready, but it was when Meta (Facebook) threw a hissy fit over the decision to block a much smaller deal for Giphy.

From the consumer’s point of view, it is high time regulators were more willing to do more than tick a few boxes and push every deal they see over the line. The CMA deserves support on this issue, and Mr Smith’s cynical attempts to bully Britain are worthy only of opprobrium.