The British Competition Authority, worst enemy of Gafam?

2023-06-12 09:38:00

The announcement sounded like a thunderclap at the end of May: the Competition and Market Authority (CMA) vetoed the takeover of Activision Blizzard by Microsoft, a $69 billion super-deal that would have constituted the acquisition largest in the history of Microsoft, well ahead of LinkedIn, bought in 2016 for 26 billion euros. It would have made the IT giant a juggernaut in the nascent market for cloud gamingwhere Microsoft is already advantageously positioned thanks to its Xbox and where Activision Blizzard can boast of very popular licenses like Call of Duty.

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The main threat to America’s tech giants today emanates not from the corridors of the White House, or even from the offices of the European Commission in Brussels, but from London, where the CMA, Britain’s competition policeman, seems determined to attack the expansionist tendencies of Gafam and the threat they pose to competition.

Game over pour Microsoft

« We have determined that Microsoft would have an interest in restricting its competitors’ access to the main licenses in the Activision Blizzard portfolio following the merger, which would have substantially weakened competition in the cloud gaming,” CMA director Sarah Cardell said of her agency’s decision.

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If the European Commission has given the green light to the acquisition, the veto of the British authority seems to condemn it. Microsoft has already announced that it is appealing the decision, but since the case will be reviewed once more by the CMA, its chances of obtaining a different verdict are low. Last year, the British authority already invalidated the takeover of Giphy by Meta, forcing Mark Zuckerberg’s company to sell off the gif creation and exchange company to Shutterstock for 53 million dollars, a fraction of the 400 million it had paid for the acquisition. It was she, too, who opposed the takeover of ARM by Nvidia, causing this giant acquisition in the semiconductor market to fall through.

It is now on the $61 billion merger announced last year between Broadcom, the American semiconductor giant, and VMWare, a specialist in cloud infrastructure, that the CMA is focusing its attention. The British competition policeman thus affirmed that this takeover would risk weakening competition, innovation and increasing the cost of computer servers on the British market. The CMA also plans to study the acquisition of Figma by Adobe, that of iRobot by Amazon, as well as the main algorithmic models that are behind the current wave of generative artificial intelligence.

How the CMA became the nemesis of Gafam

The strike power of the CMA has increased considerably since Brexit. Previously, the British authority had its hands partially tied by the European Commission, since it might not comment on the files which were examined by Brussels.

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It has since shown itself to be more offensive and intransigent than its European counterpart.

« When it finds a danger to competition, the Commission generally leaves the door open to the merger, allowing the companies involved to give guarantees that will ensure that competition will be respected despite the takeover. The CMA, on the other hand, does not generally give this possibility, unless, for example, it is a particular department of the acquired company that is problematic and it is possible to separate from it. , That is not always the case. This gives more binary verdicts: it’s yes or it’s no says Verity Egerton-Doyle, co-chief technology officer at law firm Linklaters.

And it is more and more often the no that wins. From its creation in 2013 until 2017, the CMA blocked 30% of the files it studied. Since 2018, this share has risen to 57%. The CMA can also hit harder than its counterparts across the Atlantic. ” To block a merger, the FTC or the US Department of Justice must file a lawsuit. In the United Kingdom, it is the opposite: the decision of the CMA is enough to block the merger, and it is up to the parties concerned to appeal the decision. », note Verity Egerton-Doyle.

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The intransigence of the British authority is not unanimous across the Channel. Some are worried regarding the impact it might have on the country’s attractiveness. ” If entrepreneurs think they will find it difficult to resell their business to existing companies, they may be less inclined to start their business in the UK. This does not fit very well with the government’s desire to make the country a nursery for young shoots. In addition, large companies may be deterred from taking over UK companies for fear of the CMA “Writes David Parker, in charge of the competition at Frontier Economics, a British consultant, in the columns of the Financial Times.

Three powerful women

Like Lina Khan who leads the FTC and Margrethe Vestager, European Commissioner for Competition, it is a woman who leads the CMA, Sarah Cardell, appointed in December 2022. Lawyer graduated from Oxford and Cambridge, the two elite universities of the country, she joined the CMA from its inception, where she has long been the promoter of a hard line once morest mergers in the new technology sector, seeing it as the best way to protect consumers.

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Along with the agency’s former director, Andrea Coscelli, she also worked on solutions aimed at strengthening the British regulator’s ability to combat the distortions of competition created by the Gafa, work that resulted in a proposal of law, the Digital Markets, Competition and Consumers Bill, currently submitted to Parliament and which has every chance of being passed. It will allow the CMA to dictate specific and more restrictive rules to technology companies enjoying a “ strategic market status “. This does not promise to be easy for the Gafam.