A global antitrust alliance battles Microsoft and Amgen

For connoisseurs of takeovers and the battles around them, this has been a gripping week. As the EU approved Microsoft’s $75bn bid to buy Activision Blizzard, the US Federal Trade Commission sued to block Amgen’s $28.3bn deal to acquire Horizon Therapeutics and warned of “rampant consolidation” in pharmaceuticals.

Margrethe Vestager, EU competition commissioner, is known as the nemesis of Big Tech but others are taking her place. The Amgen suit epitomises the tough approach adopted by Lina Khan, chair of the FTC, and Khan has a new ally: Sarah Cardell, chief executive of the UK Competition and Markets Authority.

Both Cardell and Khan are trying to block the Microsoft-Activision deal, and the CMA has especially incensed Bobby Kotick, Activision’s chief executive. “They’re not going to be Silicon Valley, they’ll be Death Valley,” he warned of the UK’s post-Brexit technology ambitions, following up this week by promising to expand in Europe.

That is the kind of bluster that Big Tech used to unleash on the EU, but Vestager has won favour this time. She accepted the deal after Microsoft pledged to license Activision’s titles, including its blockbuster Call of Duty, to rival cloud gaming services for 10 years.

But EU approval is limited comfort for companies such as Amazon, Google, Meta and Microsoft: the emerging Anglo-American approach to competition enforcement is a feisty enough alternative. Indeed, the UK wields a remarkable amount of power here, compared with other post-Brexit struggles: global technology is so integrated that a CMA veto will often be enough to stymie deals.

The UK and US are pushing back more energetically against monopolies in two ways. One is that they are less willing to accept behavioural remedies such as Microsoft’s Activision pledge as a fix. Instead of being drawn into what Khan calls a “whack-a-mole approach” of constantly having to ensure that companies keep commitments, they want to maintain open competition.

Second, they are stretching the boundaries of merger policing, particularly in tech, by preventing already powerful companies from entering new and growing markets with takeovers and curbing competition before it has begun. As Mark Zuckerberg once observed of Facebook’s acquisitions of Instagram and WhatsApp, “it is better to buy than compete”.

In the Microsoft-Activision case, the CMA rejected as inadequate the Microsoft remedy accepted by the EU. It then blocked the deal not because of their existing strength in video games on the Xbox console, but because it would allow the merged company too much power over the nascent business of cloud gaming. Microsoft protested in vain that this was “highly speculative”.

The FTC case against Amgen-Horizon is also a break from the past. Amgen wants to acquire Horizon to gain two blockbuster drugs that currently face little competition. This sort of deal has become common in US pharmaceuticals but the FTC argues that this would let Amgen extend the drugs’ monopolies by bundling them with its own at discounts to pharma buyers.

I approve of regulators being inventive in limiting the accumulation of excessive power by big companies. Both the tech and pharma industries are now structured in this way: small and innovative start-ups build new products in the hope of being bought by large platforms. It works for both sides financially, but reinforces monoliths.

Nor should governments simply bow to the anger of powerful enterprises. Jeremy Hunt, UK chancellor, is clearly worried at the idea of tech companies boycotting Britain. “I do think it’s important all our regulators understand their wider responsibilities for economic growth”, he said this week. But regulators also need to regulate.

Cardell and Khan do not operate in a vacuum. The push to limit the power of platforms is a political priority too. That is the purpose of the EU’s new Digital Markets Act, and why the US administration appointed both Khan and Jonathan Kanter, head of the US Department of Justice’s antitrust division.

My only proviso is that innovation in merger regulation needs to be solidly grounded and open to appeal. This is how it works in the US, where the FTC has to justify itself in court. Khan sometimes fails: in February, a federal judge allowed Meta to buy Within, a virtual reality start-up, after the FTC petitioned to get the deal blocked.

It is less clear in the UK, where an appeals tribunal rules only on whether the CMA (and the panel that makes the decision) acted rationally and legally in a merger case, rather than on its full merits. It will be difficult for Microsoft and Activision to win on appeal, putting Cardell in a very powerful global position. Britain might want to think about this arrangement again.

That said, companies are practised at spreading their power and regulators must respond. “The evolution of new markets is precisely what we missed in the past,” says Tommaso Valletti, former chief competition economist of the European Commission. Two cheers for Cardell and Khan.

john.gapper@ft.com