Microsoft’s president has attacked the UK after it was blocked from buying US gaming firm Activision, saying the EU was a better place to start a business.
The move was “bad for Britain” and marked Microsoft’s “darkest day” in its four decades of working in the country, Brad Smith told the BBC.
The regulator hit back saying it had to do what’s best for people, “not merging firms with commercial interests”.
The UK’s move means the multi-billion dollar deal cannot go ahead globally.
The gaming industry’s biggest-ever takeover worth $68.7bn (£55bn) would see Microsoft get hold of massively popular games titles such as Call of Duty, Candy Crush, and World of Warcraft.
US and EU regulators have yet to decide on whether to approve the deal, but the UK regulator said its move would mean it could not go ahead globally.
“Activision is intertwined through different markets – it can’t be separated for the UK. So this decision blocks the deal from happening globally,” the Competition and Markets Authority said.
Prime Minister Rishi Sunak has said he wants the UK to lead the world in technology, with Chancellor Jeremy Hunt stating ambitions to “turn Britain into the world’s next Silicon Valley”.
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A number of recent takeovers of British firms by overseas ones has increased concerns that the UK market is declining in importance, and is failing to attract fast-growing tech firms.
Microsoft has already said the decision may have an impact on its UK investment.
In an interview with the BBC’s Wake up to Money programme, Mr Smith said the company was “very disappointed” about the CMA’s decision, “but more than that, unfortunately, I think it’s bad for Britain”.
“There’s a clear message here – the European Union is a more attractive place to start a business than the United Kingdom.”
He added that “English Channel has never seemed wider” in terms of the contrast between the UK and the EU.
Mr Smith said the CMA’s decision marked “probably the darkest day in our four decades in Britain”.
“It does more than shake our confidence in the future of the opportunity to grow a technology business in Britain than we’ve ever confronted before.”
But on Wednesday the regulator said it was concerned the deal would hit innovation and give gamers less choice in the fast-growing cloud gaming market, where people buy subscriptions to access games online.
The UK government has made it one of its post-Brexit goals to bring in a “light-touch” set of rules for science and technology to encourage economic growth.
Mr Smith said that if the UK wants to bring in investment and make Britain a place “where technology is not only going to flourish, but be created”, then “it needs to look hard at the role of the CMA and the regulatory structure”.
He added that “people are shocked, people are disappointed, and people’s confidence in technology in the UK has been severely shaken” by the CMA decision.
UK interests
But the CMA said its decision means that a range of firms, “large and small”, can “continue to compete in this rapidly growing market”.
Its chief executive, Sarah Cardell, told the BBC’s Today programme that she did not agree with Mr Smith’s comments “at all”.
“I think this decision shows actually how important it is to support competition in the UK and that the UK is absolutely open for business,” she said.
“We want to create an environment where a whole host of different companies can compete effectively, can grow and innovate.”
Microsoft and Activision have said they will appeal against the CMA’s decision.
For the deal to work, it has to be approved by regulators in the UK, the US and the EU.
The UK is the first to announce its decision, but the US Federal Trade Commission last year began a legal challenge to block the takeover.
In March, EU regulators delayed their decision after Microsoft proposed concessions to get the deal over the line.
Cloud gaming
This merger is important for Microsoft because it wants to strengthen its position in the fast-growing cloud gaming market.
Rather than buying games consoles, then games to play on them, cloud gaming means fans can stream titles via the internet.
Microsoft has already invested a lot in this space, as it sees the future of gaming as people playing on their phones, consoles, smart TVs and other devices.
The Activision deal would also give it some very popular games titles, allowing it to compete more effectively with rivals like Sony.
Sony’s position is that if the deal went ahead, Microsoft would have an incentive to restrict access to Activision’s titles to PlayStation, which would be bad for gamers.
The CMA said Microsoft already had a 60-70% share of the cloud gaming market, and combining with Activision would “really reinforce” its “strong position”.
“That would be problematic because it would really harm the ability of other competing cloud platforms to compete effectively and offer the kind of innovation and product choice that we want to see in this market,” Ms Cardell said.