UK watchdog’s block on Microsoft-Activision deal had an eye on the future

Published

2 years ago

April 26, 2023

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It is rare for a decision by the UK’s competition regulator to make waves globally.

The Competition & Markets Authority (CMA) has traditionally not been as significant a force in preventing corporate deals as the European Commission or the US Federal Trade Commission.

So the CMA’s decision to block Microsoft’s $75bn takeover of the games publisher Activision Blizzard is one of its most far-reaching decisions in years.

It is also huge for a sector – video gaming – that is of more importance to the UK and to the global economy than is widely appreciated.

This was the biggest acquisition in Microsoft‘s history – and the CMA’s intervention may yet scupper the deal.

It has sent Activision shares down more than 11% in pre-market trading.

The decision has come as a surprise for a couple of reasons. The first is that the CMA has not blocked the decision due to concerns over the competition in the supply of games consoles.

This was of particular importance in the UK. Elsewhere around the world, in particular the US, playing games on large PCs is commonplace.

The UK, by contrast, is not a nation of PC players but one of console players. This reflects the fact that UK housing is smaller, typically, than in the US and so British gamers are more likely to play on consoles that can easily be fitted under a TV set and take up less space.

Consoles like Microsoft’s Xbox and Sony’s PlayStation are therefore a more important factor in the UK gaming market than in the US one.

The concern was that armed with Activision’s big money-spinning titles, chiefly Call of Duty, World of Warcraft and Overwatch, Microsoft would have had plenty of scope to hurt PlayStation sales were it to make games exclusive only to the Xbox.

It was seen as particularly significant for the CMA in view of the fact that in the UK, more gamers own a PlayStation 5 than own an Xbox series X or its cheaper sister product, the Xbox series S.

But the CMA said last month it had provisionally concluded that the merger would not result in a substantial lessening of competition in console gaming services “because the cost to Microsoft of withholding Call of Duty from PlayStation would outweigh any gains from taking such action”.

Accordingly, as this was the main area in which the CMA was expected to have competition concerns, it is surprising that the regulator has decided to block the takeover.

The other big surprise is that the ground on which the CMA wants to block the proposed deal is that it would potentially reduce competition in the cloud gaming sector.

This is because the cloud is at present a relatively small part of the way in which video games are played currently.

But it is already a field in which Microsoft has established a lead over Sony and that may well be of concern to the CMA – particularly given Microsoft’s wider market dominance in cloud services (another market the CMA is investigating separately) and given the work Microsoft is doing to deliver many of the services available through Gamepass, its subscription service, through the cloud.

The CMA has clearly made this decision with an eye to the future.

The CMA’s intervention may not be enough to kill this deal.

Microsoft and Activision may find a way of offering remedies to satisfy it, but the size and the complexity of the global gaming market would probably make it too complicated for Microsoft and Activision to unpick it in a way that the UK remained excluded from a tie-up elsewhere around the world.

But there are also competition hurdles elsewhere, particularly the US, where the FTC has said it will sue to block the deal.

And, in other jurisdictions, concerns over competition in consoles may well be a factor. Microsoft has insisted throughout that it has no intention of making Activision’s games exclusive to Xbox, Gamepass and to PCs.

But other watchdogs may choose to consider an interview given last month by Harvey Smith, the director of a game called Redfall, which is published by Bethesda Softworks, a company bought by Microsoft in 2021. The development of Redfall was interrupted by the pandemic, during which, Microsoft bought Bethesda.

Mr Smith told the US video game and entertainment website IGN that, originally, Redfall was to be released on all platforms but that there was a “huge change” once Microsoft bought Bethesda.

He told IGN that, even though work had been started to make a PlayStation version of Redfall, Microsoft had cancelled that work in order to make it exclusive to Xbox.

He said: “We were acquired by Microsoft and it was a capital C change. They came in and said, ‘No PlayStation 5, we’re focusing on Xbox, PC and Game Pass’.”

That interview has already been flagged by Sony in some of its representations to competition watchdogs.

A key point to bear in mind is that Microsoft is doing well enough – last night’s quarterly results showed a business firing on all cylinders – for it not to need Activision.

That may not be true for the latter which, shortly before the takeover was announced, was beset by allegations of sexual assault and mistreatment of women at the company in recent years.

That may explain the vituperative response of Bobby Kotick, Activision’s chief executive, to today’s decision. Mr Kotick, who stands to make millions from a sale of the company, has previously accused the CMA of being “co-opted by FTC ideology”.

He has, though, been careful to praise Rishi Sunak, telling the Financial Times in February this year that the PM was “smart” and understands business, adding: “If I look at our hiring plans, we’re more likely to find the next 3,000 to 5,000 people that we need in the UK than almost any other country.”

That was very much at odds with his assertion today that “the UK is clearly closed for business”.

Some will dismiss that as a man lashing out in disappointment.

Others will view it as a threat.

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Tesla approves $29bn share award to Elon Musk

Published

2 hours ago

August 4, 2025

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Tesla approves bn share award to Elon Musk

Tesla’s board has signed off a $29bn (£21.8bn) share award to Elon Musk after a court blocked an earlier package worth almost double that sum.

The new award, which amounts to 96 million new shares, is not just about keeping the electric vehicle (EV) firm’s founder in the driving seat as chief executive.

The new stock will also bolster his voting power from a current level of 13%.

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He and other shareholders have long argued that boosting his interest in the company is key to maintaining his focus after a foray into the trappings of political power at Donald Trump‘s side – a relationship that has now turned sour.

Musk is angry at the president’s tax cut and spending plans, known as the big beautiful bill. Tesla has also suffered a sales backlash as a result of Musk’s past association with Mr Trump and role in cutting federal government spending.

The company is currently focused on the roll out of a new cheaper model in a bid to boost flagging sales and challenge steep competition, particularly from China.

The headwinds have been made stronger as the Trump administration has cut support for EVs, with Musk admitting last month that it could lead to a “few rough quarters” for the company.

Tesla is currently running trials of its self-driving software and revenues are not set to reflect the anticipated rollout until late next year.

Musk had been in line for a share award worth over $50bn back in 2018 – the biggest compensation package ever seen globally.

But the board’s decision was voided by a judge in Delaware following a protracted legal fight. There is still a continuing appeal process.

Earlier this year, Tesla said its board had formed a special committee to consider some compensation matters involving Musk, without disclosing details.

The special committee said in the filing on Monday: “While we recognize Elon’s business ventures, interests and other potential demands on his time and attention are extensive and wide-ranging… we are confident that this award will incentivize Elon to remain at Tesla”.

It added that if the Delaware courts fully reinstate the 2018 “performance award”, the new interim grant would either be forfeited or offset to ensure no “double dip”.

The new compensation package is subject to shareholder approval.

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Motor finance operators can breathe big sigh of relief

Published

2 hours ago

August 4, 2025

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Motor finance operators can breathe big sigh of relief

Bank stocks have enjoyed a boost as traders digest the Supreme Court’s ruling on the car finance scandal.

Some of the country’s most exposed lenders, including Lloyds and Close Brothers, saw their share prices jump by 7.55% and 21.62% respectively.

It came after the court delivered a reprieve from a possible £44bn compensation bill.

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Banks will still most likely have to fork out over discretionary commissions – a type of commission for dealers that was linked to how high an interest rate they could get from customers.

The FCA, which banned the practice in 2021, is currently consulting on a redress scheme but the final bill is unlikely to exceed £18bn. Overall, the result has been better than expected for the banks.

Lloyds, which owns the country’s largest car finance provider Black Horse, had set aside £1.2bn to cover compensation payouts.

Following the judgment, the bank said it “currently believes that if there is any change to the provision, it is unlikely to be material in the context of the group”.

The judgment released some of the anxiety that has been weighing over the Bank’s share price.

Jonathan Pierce, banking analyst at Jefferies, said the FCA’s prediction was “consistent with our estimates, and most importantly, we think it largely de-risks Lloyds’ shares from the ‘motor issue'”.

Bank stocks have responded robustly to each twist and turn in this tale, sinking after the Court of Appeal turned against them and jumping (as much as 8% in the case of Close Brothers) when the Supreme Court allowed the appeal hearing.

Concerns about this volatility motivated the Supreme Court to deliver its judgment late in the afternoon so that traders would have time to absorb the news.

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FCA considering compensation scheme over car finance scandal – raising hopes of payouts for motorists

Published

23 hours ago

August 3, 2025

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FCA considering compensation scheme over car finance scandal - raising hopes of payouts for motorists

Thousands of motorists who bought cars on finance before 2021 could be set for payouts as the Financial Conduct Authority (FCA) has said it will consult on a compensation scheme.

In a statement released on Sunday, the FCA said its review of the past use of motor finance “has shown that many firms were not complying with the law or our disclosure rules that were in force when they sold loans to consumers”.

“Where consumers have lost out, they should be appropriately compensated in an orderly, consistent and efficient way,” the statement continued.

The FCA said it estimates the cost of any scheme, including compensation and administrative costs, to be no lower than £9bn – adding that a total cost of £13.5bn is “more plausible”.

It is unclear how many people could be eligible for a pay-out. The authority estimates most individuals will probably receive less than £950 in compensation.

The consultation will be published by early October and any scheme will be finalised in time for people to start receiving compensation next year.

What motorists should do next

The FCA says you may be affected if you bought a car under a finance scheme, including hire purchase agreements, before 28 January 2021.

Anyone who has already complained does not need to do anything.

The authority added: “Consumers concerned that they were not told about commission, and who think they may have paid too much for the finance, should complain now.”

Its website advises drivers to complain to their finance provider first.

If you’re unhappy with the response, you can then contact the Financial Ombudsman.

The FCA has said any compensation scheme will be easy to participate in, without drivers needing to use a claims management company or law firm.

It has warned motorists that doing so could end up costing you 30% of any compensation in fees.

The announcement comes after the Supreme Court ruled on a separate, but similar, case on Friday.

The court overturned a ruling that would have meant millions of motorists could have been due compensation over “secret” commission payments made to car dealers as part of finance arrangements.

The FCA’s case concerns discretionary commission arrangements (DCAs) – a practice banned in 2021.

Under these arrangements, brokers and dealers increased the amount of interest they earned without telling buyers and received more commission for it. This is said to have then incentivised sellers to maximise interest rates.

In light of the Supreme Court’s judgment, any compensation scheme could also cover non-discretionary commission arrangements, the FCA has said. These arrangements are ones where the buyer’s interest rate did not impact the dealer’s commission.

This is because part of the court’s ruling “makes clear that non-disclosure of other facts relating to the commission can make the relationship [between a salesperson and buyer] unfair,” it said.

It was previously estimated that about 40% of car finance deals included DCAs while 99% involved a commission payment to a broker.

Nikhil Rathi, chief executive of the FCA, said: “It is clear that some firms have broken the law and our rules. It’s fair for their customers to be compensated.

“We also want to ensure that the market, relied on by millions each year, can continue to work well and consumers can get a fair deal.”