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Microsoft cries foul over UK gaming deal blocker but it's hard to feel sorry for them

Brit regulator is merely heeding the Call of Duty

Opinion If IT was a perfume market, there'd be little to touch Petulance du Big Tech for a strong and unmistakable fragrance. Amid overtones of sour grapes and crocodile tears, the bitter almonds of injured innocence and aromatic arrogance linger long on the nose.

Microsoft and Activision Blizzard are shipping gallons of the stuff. UK regulator the Competition and Markets Authority (CMA) has outlawed what would be the gaming sector's biggest deal in history, with the Redmond giant aiming to gobble up the Call of Duty gang for a cool $68.7 billion. The CMA says this would give Microsoft far too much power to distort the markets. How could you think that of us? says Microsoft.

Let's see. Microsoft has a metric ton of bad karma to undo. From the days of DOS through the Wintel monopoly years to today's total stack subscription model, the company has run on the principle of extend, embrace and extinguish.

The claims that the UK is not being friendly to tech companies, and not a good place to do business, are particularly rich. Those with long memories will recall the days when Britain had a mobile phone industry, with a company called Sendo combining an attractive product portfolio with a unique carrier-based marketing strategy. It did so well that Microsoft chose it as the first launch partner for the new Windows smartphone platform. Or so Sendo believed – only to see the first product of the relationship pipped at the post by another from HTC. The full story of what Sendo firmly believed was a deceptive relationship is not and may never be known, but the company did not survive the experience.

Cases like this were mere background noise to the headliners of governmental and regulatory antitrust and anti-competitive proceedings, together with those legal actions which were found conclusively against Microsoft. The curious can find a history [PDF] from the European Commission. It starts when Microsoft first tasted monopoly power with MS-DOS, and liked that taste very much; it ends with the abandonment of the company's attempts to dominate the internet by imposing its browser and embedded protocols.

It's true that Microsoft has seemed to mend its ways in the post-Ballmer era, with a much less antagonistic approach to open source and much greater willingness to work with others. It's at least arguable that this is due to the company being wrong-footed by its inability to control the online world and the rapid rise of more nimble internet-native rivals. Microsoft doesn't have a good track record in sectors where it can't be dominated by structural advantage – despite many aggressive moves, for example, it has always failed in mobile. With no monopoly at any part of the stack from OS to application, few companies or consumers saw any reason to choose any of the Windows mobile iterations.

It's taken a while for Microsoft to get its act together in the cloud, moving products, revenue models and strategies into this new world from its comfort zone of the early 21st century. Now it's there, however, the old habits are back again.

The European regulators are looking into how bundling Teams and OneDrive as practically compulsory components of Office and Windows might be distorting the market. Reports of a pre-emptive unbundling offer from Redmond aren't placating anyone, though. Mere unbundling may have made sense in the last century, which explains why Bill Gates fought it so fiercely, but in a connected world of freely accessible services and friction-free component installation, bundling is a mere bagatelle. Proper interoperability and non-preferential license bundling are the sort of tools from which a fair market can be built, and those aren't on the cards.

So when Microsoft is keen to shell out the sort of coin many countries spent on surviving the pandemic, it is fair and reasonable to ask whether it will shift a market into the realm of Redmond's uncontested control.

The CMA says not so much for consoles, but in cloud gaming – where Microsoft already has majority status – the mammoth deal would cede it far too much power.

No matter how much Microsoft sniffs that the regulator just doesn't understand how the market works, it's hard to disagree with the decision. It's not as if anyone has to look far to find how dominance breeds damage in online marketplaces, with the Apple App Store forcing all-comers into whatever business models Apple chooses. With cloud gaming so new and so rapidly growing, such dominance would be doubly dangerous. Early ownership can shape the market so decisively it can take decades for meaningful change. MS-DOS provided just such an advantage, one that lasted for the two decades where computer power advanced most rapidly but the PC experience hopped between pools of stagnation.

So no, the UK is not closed to business. Rather the opposite. It remembers the past and understands the present, and knows how to protect the future. It would behove Microsoft – and any big tech company with a history of market distortion – to engage with history, not histrionics. Kicking up a stink is no substitute for seeing sense. ®

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