Microsoft/Activision: messy process yields a better outcome for consumers

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Mergers can be good or bad for consumers. Bigger companies can pass scale benefits on. Dominant ones hog markets and inhibit competition. Deciding which side of the line a deal falls into has always been more of an art than a science. Now it seems no two regulators call it the same way.

For evidence, look no further than Microsoft’s $75bn purchase of Activision Blizzard. On Friday, the UK’s Competition and Markets Authority, which in April had rejected Microsoft’s undertakings, provisionally approved a revised proposal. The EU had previously waved the deal through. The US watchdog had tried to halt the bid but its decision was reversed in court. It is still appealing against the ruling.

This extraordinary mess highlights how hard it is to police tech deals. Competition watchdogs have in the past been too lenient. Now, they are trying to act early to protect nascent markets. Trouble is, no one knows what those will look like, leaving a lot of room for divergence of opinion.

Take Microsoft’s case. Regulators focused on cloud gaming, which is at present a tiny market. Like TV streaming, it may become huge. The concern was that Microsoft’s strong position in cloud, coupled with Activision’s blockbuster Call of Duty game, would cause potential future challengers to wither on the vine. Standing that theory up requires a lot of guesswork, and helps explain why regulators took such different stances.

The UK’s CMA has extracted a stronger undertaking for consumers. To get the deal through, Microsoft had to promise to sell cloud licences for Activision’s games to France’s Ubisoft. The latter’s share price reaction — up nearly 10 per cent on the announcement — suggests a real transfer of value.

Yet the messy process leaves much to be desired. The success of Microsoft’s “double dip” approach is particularly concerning. If companies that fall foul of regulators can come back with a better offer, some may not put their best foot forward immediately.