UK Business Minister Defends CMA Decision to Block Microsoft’s Activision Deal

British business minister Kemi Badenoch said on Tuesday she disagreed with Microsoft (MSFT.O) President Brad Smith that the Competition and Market Authority’s initial decision to block its purchase of videogame maker Activision was evil for Britain. The government stands by the CMA’s decision, based on a thorough industry analysis, and is necessary to protect competition in the gaming sector.

The ruling made public on Monday, is a setback to Microsoft’s efforts to burnish its image as a responsible corporate citizen in the face of mounting regulation over Big Tech. The company had hired top talent in its global policy team, including John Frank, a veteran of Europe’s antitrust fights, and Casper Klynge, Denmark’s former tech ambassador, to show it takes its responsibilities seriously.

Microsoft had argued that the CMA’s determination that it was unfairly dominant in video game services would thwart innovation and hurt consumers. The company is appealing the decision and will fight to have it overturned.

Its rivals, meanwhile, are pressing regulators to take a harder line in the battle over online games. They argue that Microsoft’s dominance over the market is a clear violation of rules that prevent firms from unfairly leveraging their size and monopoly power to dominate the market.

This is not the first time the UK has dealt with a dispute between Microsoft and its competitors. The company has fought bare-knuckled legal fights with competitors and regulators for years, dating back to its battles over desktop operating systems and web browsers. The tactics it honed in those battles have started to creep up again as the company finds itself on the wrong end of antitrust scrutiny.

In the case of Activision, the CMA determined that the purchase would give Microsoft a dominant position in online services for video games, which it could then use to stifle competition in its game console market. It also argued that the company’s efforts to promote its cloud-computing platform, Azure, over competing products was unfair.

Despite the setback, Microsoft remains confident that the appeals process will overturn the CMA’s ruling and it will win approval to complete its purchase of the games giant. However, it will have to sell off its streaming rights, which may reduce the value of its bid.

The CMA’s move warned big multinationals that it can be ready to defend competition and its consumers in the same way as European regulators, even in countries with unique regulatory processes. For Microsoft, this was a wake-up call that it must be more careful in its lobbying tactics or risk finding itself on the losing side of future antitrust cases against it and other industry giants. The EU is a different environment than the US, but it shouldn’t be seen as a reason to drop Britain’s sights on a free trade deal with the US. That could be a missed opportunity for the UK’s economy and reputation as a technology hub.

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