FILE PHOTO: Microsoft logo is seen on a smartphone placed on displayed Activision Blizzard's games characters in this illustration taken January 18, 2022. REUTERS/Dado Ruvic/Illustration/File Photo - REUTERS/Dado Ruvic
“It should be as much the aim of those who seek for social betterment to rid the business world of crimes of cunning, as to rid the entire body politic of crimes of violence,” President Roosevelt told Congress in his State of the Union Address in 1901.
Today, the Roosevelts – Theodore and Franklin Delano – are credited with saving capitalism from the populists and socialists who wanted to burn the house down.
Both challenged the idea that business should do exactly as it pleased.
Yet today “Big Tech” platforms have replaced a functioning marketplace with systems they control, carefully rationing the information that both producers and consumers need. That’s a “crime of cunning” few can comprehend. So the world has changed, but competition policy hasn’t. Last week, the UK made its move.
Both are US companies. But the UK isn’t quite the outlier it might seem – the United States is also suing to halt the deal. “An informal Atlantic alliance has emerged between the agencies in the US and the CMA,” says Christina Caffara, former chief economist at the European Commission’s competition unit. “Brussels is being left behind,” she says, “It hasn’t evolved in the same way.”
After Brexit, Smith said the European Union was now a “more attractive place” than the UK. And darkly, he also mentioned national security, when he said “we play a vital role not just supporting businesses and nonprofits but even defending the nation from cybersecurity threats”.
FILE - Microsoft President Brad Smith addresses a media conference regarding Microsoft's acquisition of Activision Blizzard and the future of gaming in Brussels, Tuesday, Feb. 21, 2023. Microsoft's charm offensive with the world's governments is starting to lose some of its charm as the software giant is confronting some of its toughest antitrust scrutiny since co-founder Bill Gates was in charge. (AP Photo/Virginia Mayo, File) - AP Photo/Virginia Mayo
Would Microsoft really leave us vulnerable because it couldn’t get the rights to Call of Duty? Such threats may backfire, and it all rather smacks of entitlement.
The CMA decision also attracted claims that the UK tech industry will be damaged. But as I found last week, that all depends on who you talk to. Director level executives at games companies explain that the path to a big money exit needs to be there as an incentive.
They fear the CMA’s new doctrine may one day deny them a well-deserved cash out. But others whisper that high quality content creators must be able to set the price for their goods in a fair negotiation, and they see what can happen in the platform world, where a dominant distributor sets the terms of trade. Entrepreneurs still quite like the idea of growing the company that they founded independently.
There is a growing conservative support in the US for taming a censorious Big Tech. Many were wary of handing even more market power to Microsoft, which is already a giant games publisher.
Some will doubtless recall how key Microsoft products, such as its Internet Explorer web browser, languished and became dilapidated over the years from neglect, once the threat of competition diminished. However to be fair, Microsoft’s games story is a little different.
The games division somehow evaded the savage corporate infighting and entropy at Microsoft under its previous CEO, Steve Ballmer, that had made other arms such dysfunctional operations. It deserves the success it enjoys today.
The CMA decision is really about the future. Microsoft wants to do for games what Netflix or Spotify have done for TV and music, and expand the market with an all-you-can-eat deal too. The tenner-a-month Xbox Game Pass launched in 2017 does just that. But once games will be running remotely on Microsoft’s servers – as a few already do today, like Flight Simulator – then many more consumers will be able to play.
As the CMA explained: “the cloud allows UK gamers to avoid buying expensive gaming consoles and PCs and gives them much more flexibility and choice as to how they play.”
SUN VALLEY, ID - JULY 07: Bobby Kotick, chief executive officer of Activision Blizzard Inc., attends the Allen & Company Sun Valley Conference on July 7, 2015 in Sun Valley, Idaho. Many of the worlds wealthiest and most powerful business people from media, finance, and technology attend the annual week-long conference which is in its 33nd year. (Photo by Scott Olson/Getty Images) - Scott Olson/Getty Images
Blocking such acquisitions entails a major philosophical break with the principle that has guided competition regulators for 40 years. This is the idea that lower prices trump all other considerations. In US law this is enshrined as “the consumer welfare standard”.
“In the US now it’s broadly accepted now that the consumer welfare standard is dead – but we need new ideas,” says Caffara, now a managing partner at Keystone.
Critics say the principle has failed to stop an enormous concentration of power, of private interests replacing open markets. And those “efficiencies” that Big Tech likes to tout look somewhat elusive. The tech giants have shed hundreds of thousands of jobs without any apparent ill effect.
The problem is that as Big Tech has grown more dominant, the very idea of markets has fallen out of fashion. Those who once defended them have become mindless cheerleaders for monopolies. And one senses that if it was all left to Labour, they’d be quite happy with monopolies, so long as they can tax them every now and again.
So regulators are stumbling towards new thinking on competition that’s more reflective of the dominance of Big Tech, largely alone. They have a sympathetic public to call on, but few friends. We can hardly blame the CMA for trying, no matter how clumsily, to address a very real problem.
