There’s an order of magnitude difference between the population represented by the CMA and the one by the EU, so I don’t see the situation as being identical.
The thing is that I don’t think anybody was dismissing the CMA because MS was powerful, but because the possible theories of harm were easily dismissible. Still, if the CMA made his position clear before even analyzing the facts, in what can only be considered political posturing against “US big techs”, then theories of harm were the least of the concerns. There was little that MS could do to make this acquisition, or any other for that matter, possible.
My understanding is that the CTA can only shoot down the CMA decision for a procedural defect, so I don’t expect things to change substantially. That quick knee-jerk reaction by the CMA is a sign that they are taking things as matter of pride. A bit of professionalism would be in dire need.
If what happened was that Lina Khan encouraged the CMA to just block and there wasn’t actual basis to block, then what Lina Khan did was encourage a foreign entity to start a trade war with the US. What the CMA did was listen and think it’s a good idea, then started a trade war with the US.
The fact that’s not a possibility that was denied by the CMA is just absolutely insane to me.
They have trade being affiliated to EC to being affiliated to US. Except, I do not see the position of Khan to be well appreciated even in the US for long.
I agree that’s probably what happened. That’s the reason for the slow motion CMA train wreck unfolding. The other driving factor is the CMAs delusional self appointed position as the de facto CEO of US Technology companies. It’s so ludicrous that they even think this will work. The longer this goes on the more hostile UK appears to technology companies. Being political as a negotiation tactic is fine, but CMA has decided it’s less about negotiations and more about intimidating American businesses to bend to the will of the CMA. Closed for business indeed.
Yes but the UK market is probably as significant for MS as the EU market. Regardless of population. I mean gaming wise UK is their second biggest market and given the number of huge public sector contracts MS hold here I suspect that we’re not talking orders of magnitude different in terms of the importance of the markets overall.
Its why the UK was explicitly in the deal as requiring regulatory clearance but say Australia was not…MS know that smaller markets don’t wield the power but the UK was named because ultimately it is key to MS.
The CAT probably can’t ‘overturn it’ but they can find that parts of the determination by the CMA were legally irrational, illegal or broke the procedural framework against which the CMA operates and then ask them to re-look at it based on that determination. The problem is its a high bar - and you need to win on strong enough grounds that it would force the CMA to substantively change its decision. That has never happened in a merger review case before - where someone has appealed to CAT and won significantly enough to overturn the decision.
What I suspect the plan is - is for MS to apply pressure via political leaders to squeeze the CMA - win something at CAT and via that political pressure and the CAT ruling squeeze out a change of decision.
I think the CMA clearly won’t back down now without CAT intervention - they dug their heels in too far. But a combination of the case being remitted back to them and government pressure to ‘not hurt investment’ might give them a climbdown.
The issue is timing. We could be looking at 18 months for such a process…which is why the new end date that MS and ABK negotiate (if they do) will be instructive as to how they see it going.
The CMA will bend the knee there is even some post on Linked that Sarah Cardell has now amended that seems to implicate her and Khan. The CMA will absolutely cave there is no one on their side and it has become so obvious to all that they blocked for no reason. I do not see Microsoft in anyway submitting. The deal will close with or without the CMA.
I hope Microsoft can apply some political pressure to the UK leadership and present a great case for CAT. Maybe behind the scenes Microsoft will agree to expand AI, Cloud and their game studios across the UK. The CMA looks weak and Microsoft will say the UK is open for business. If the citizens can’t get Call of Duty in gamepass or cloud and business/job opportunities are limited for UK citizens politicians will pay.
Every day since the EU ruled, theres someone else calling bullshit on the CMA. Strauss Zelnick did it today. UK government did it. I think Microsoft has a great case to argue the CMA defined the market wrong. Its probably more worthwhile for the CMA to reconsider their stance themselves to avoid embarressment before the CAT does it for them or the government.
It’s true that MS had a significant UK gaming marketshare position historically, but that position has eroded in the last decade to a much higher degree than in the rest of Europe (albeit the EU was on worse position to start with). One could argue that MS has higher growth potential in the EU than in the UK, where MS is really stagnating. And that only applies to the gaming revenue… I find hard to believe that 500 millions EU citizens don’t generate significantly more Azure, Office or Windows revenue than the UK.
Its difficult to track revenue data per country, but the best one I found is that MS had a revenue close to $6.5bn in 2021 in the UK. How much of that comes from Xbox? 5-10%? Probably not much more. ABK made $8bn last year. Even subtracting the ABK specific UK revenue from that number, the amount is disproportionately larger than the UK Xbox revenue. Add to that the Xbox growth potential from ABK compared to the UK Xbox one, that is very probably close to its market limit (unless our old EU Norse gods fulminate Nintendo or Sony). So if there’s any legal possibility to carve out the entire Xbox business from UK MS portfolio, I wouldn’t rule it out if only as theoretical study.
UK revenue for MS is funnelled in large part through the EU and Ireland. Meaning its considerably in excess of the number you are quoting.
Further MS is a single entity - we are talking about its ability to trade in the UK period. Xbox doesn’t exist as a separate business - Microsoft are acquiring ABK and therefore we’re talking the full UK trade.
The point I was making re Xbox is that the UK is the only major market after the USA where Xbox is remotely competitive with Playstation. I believe there are still EU countries where Xbox has no presence and isn’t sold.
The reason the UK is so valuable to Microsoft is not really to do with gaming but the huge amount of contracts it holds here. Whilst they obviously have contracts in the EU it isn’t proportionate to market size - the UK is crucial for MS its why they included regulatory clearance for the UK market in the deal agreement.
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That’a the thing. The CMA is betting that MS will fold, pay the 3bn fine to ABK for terminating the deal, while winning the international game of being the dragon-slayer that stopped the big bad wolf. You have a local government agency from a medium sized country dictating the rules for the entire planet. It’s a win-win scenario for the CMA, that is clearly punching way above it’s weight.