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Mergers can have varying impacts on consumers. Some larger companies can share the benefits of scale, while dominant ones may hinder market competition. Determining where a deal falls on this spectrum has always been subjective. Now, it appears that regulators can’t agree on the right approach.
A perfect example of this is Microsoft’s $75 billion acquisition of Activision Blizzard. The UK’s Competition and Markets Authority initially rejected Microsoft’s proposals in April but recently provisionally approved a revised offer. The European Union had previously approved the deal, while the US watchdog initially tried to block it but had its decision reversed in court. The US regulator is currently appealing the ruling.
This chaotic situation highlights how difficult it is to regulate technology mergers. In the past, competition watchdogs were lenient, but now they are attempting to take preemptive action to safeguard emerging markets. However, the problem is that nobody truly knows what these markets will look like, leading to a divergence of opinions among regulators.
Let’s look at Microsoft’s case as an example. Regulators focused on cloud gaming, which is currently a small market but has the potential to become significant, much like TV streaming. They were concerned that Microsoft’s strong position in cloud technology, combined with Activision’s popular game “Call of Duty,” could stifle future competition. Proving this theory requires a lot of speculation, which explains the differing regulatory stances.
The UK’s Competition and Markets Authority secured stronger consumer protections. To finalize the deal, Microsoft had to commit to selling cloud licenses for Activision’s games to France’s Ubisoft. The market’s positive reaction to this announcement, with Ubisoft’s share price rising nearly 10 percent, indicates a real transfer of value.
However, the messy process raises concerns. Microsoft’s ability to provide an improved offer through its “double dip” approach is particularly worrying. If companies that face regulatory scrutiny can come back with better proposals, it might discourage them from initially presenting their best offer.
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