Insight 1998
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The UK’s competition authority is ready to regulate big tech by Zach Meyers, 26 May 2023 The UK competition authority has decided Microsoft cannot acquire games company Activision. This should reassure politicians that the authority wants dynamic and competitive markets – and it is less willing than the EU to rely on intrusive rules which could stifle innovation. Competition regulators across the West are focused on the dominance of a small number of American firms in digital markets. But only the UK’s Competition and Markets Authority (CMA) has blocked acquisitions by the largest tech firms. It unwound Meta’s acquisition of Giphy, a library of animated clips. Then, it blocked Microsoft’s $69 billion acquisition of gaming company Activision. That will probably defeat the deal globally – despite the European Commission approving the deal based on commitments from Microsoft that would regulate its future behaviour. Commentators dispute whether the CMA’s approach will help or hinder tech innovation – and many worry about giving the CMA broad new powers to regulate big tech. The EU’s approach would have led to ongoing supervision of Microsoft’s behaviour. The CMA’s decision should reassure parliamentarians that the UK regulator has little appetite for overly intrusive regulation of big tech. Corporate mergers often benefit consumers. For example, they can give smaller firms more resources to disseminate their technologies. However, all Western authorities worry that tech mergers might also reduce competition. Tech markets are often dominated by one or two players, which can be disrupted only by radical innovation, in the way that Google disrupted Yahoo 20 years ago, and Bing might use artificial intelligence to disrupt Google today. EU and US authorities are therefore increasingly hostile to big tech acquisitions of potential disruptors. Yet in the US, judges typically approve mergers where the two parties’ products do not compete directly – which means most tech deals go ahead. EU courts similarly require the Commission to show a “strong probability” that a merger could harm competition before blocking it. The Commission therefore cannot easily block tech deals on the basis that the firm being acquired might one day become a disruptor. Post-Brexit Britain has emerged with the more aggressive regulator. In 2021, the CMA ordered Meta to reverse its acquisition of Giphy, on the basis that part of Giphy’s business could have grown into a competitor to Meta’s online advertising. The CMA took a similar future-looking approach in the CER INSIGHT: THE UK’S COMPETITION AUTHORITY IS READY TO REGULATE BIG TECH 26 May 2023
INFO@CER.EU | WWW.CER.EU
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