No 10 hits back at Microsoft after company says EU ‘more attractive’ post-Brexit after takeover blocked – as it happened

Closing summary: No. 10 in dispute with Microsoft over approach to business

Flutter Entertainment, the owner of Betfair and Paddy Power, has said the UK government’s gambling reforms could cost the FTSE 100 company between £50m and £100m a year from 2024 onwards.

That adds to £150m already “removed” from its revenues by voluntary actions and extra costs made ahead of the rules, it said.

Liz Ritchie founded campaign group Gambling with Lives, with her husband after their son, Jack, took his life because of gambling addiction. She said:

After a long fight we’ve won concessions on some of the key areas but so much more needs to happen to reduce the horrendous harm caused by one of the most loosely regulated gambling industries in the world.

We’ve won the argument against a powerful gambling lobby but this is just the beginning. There’s another family devastated by gambling suicide every day, and we won’t stop until the deaths do.

Peter Jackson, Flutter’s chief executive, said the reforms were “a significant positive moment for the UK gambling sector, raising standards and bringing the regulatory framework into the digital age”.

Flutter said it will lobby in the consultations on rules for “providing support to the minority at risk of gambling harm without interfering disproportionately with the enjoyment of the vast majority”.

Jillian Ambrose

There is a lot for Fed officials to think about, as the US economy slows and they tighten monetary policy. So they won’t be best pleased by a story that has just emerged that its chair, Jerome Powell, was tricked into a video call with apparent Russian pranksters.

Powell spoke to people posing as Ukrainian President Volodymyr Zelenskiy, according to video shown on Russian state television.

The video appears to show Powell sitting (against a rather fetching tree-filled virtual background) in suit and tie and discussing US monetary policy. It is unclear whether the substance of the video has been edited, but the Federal Reserve has confirmed that the prank call happened, Bloomberg News reported.

Chair Powell participated in a conversation in January with someone who misrepresented himself as the Ukrainian president. It was a friendly conversation and took place in a context of our standing in support of the Ukrainian people in this challenging time. No sensitive or confidential information was discussed.

The matter has been referred to appropriate law enforcement, and out of respect for their efforts, we won’t be commenting further.

Powell is not the first person whose security should probably be tighter to be tricked into taking prank calls from the same pair: European Central Bank president Christine Lagarde also reportedly had the same experience. Bank of England security are no doubt double checking Andrew Bailey’s calendar.

The slower-than-expected US GDP data suggest that the world’s largest economy is at risk of falling into recession, according to some economists and investors.

Andrew Hunter, deputy chief US economist at Capital Economics, a consultancy, said:

The disappointing 1.1% annualised rise in first-quarter GDP indicates that the economy had less forward momentum at the start of this year than previously thought. We continue to expect the drag from higher interest rates and tightening credit conditions to push the economy into a mild recession soon.

The data confirm the message from other indicators that while economic growth is slowing, it isn’t yet collapsing.

Tom Hopkins, portfolio manager at BRI Wealth Management, said:

This is the outcome the Federal Reserve wanted, and investors will be poised to see how the economy fares over the coming months. Whilst inflation in the US is cooling, the labour market continues to remain tight.

The Federal Reserve meets again next week, in which another rate rise looks likely before an expected pause in hikes over the summer. The question remains, will the US slip into a recession this year or will its resilience prevail?

US GDP growth slowed sharply in first quarter of 2023

Some UK-based commentators are also pushing back on Microsoft’s portrayal of the block on its takeover of Activision Blizzard as a blow to British reputations.

Dan Ridsdale, director of tech, media and telecoms at Edison Group, an investment consultant, said:

The assertion that the CMA’s decision to bloc the deal is symptomatic of the UK becoming less attractive to do business is off the mark, in my view. In the US, the Federal Trade Commission is also seeking to block the deal, for example, and other countries may well also follow suit.

The concerns relate to Microsoft’s record or acquiring and using valuable content from rival consoles or streaming platforms to supress competition. Relative to the US, the UK has quite a console-centric gaming community, and while the streaming market is still developing, Microsoft already holds a very strong hand.

Microsoft has explicitly said that it has no plans to make any of Activision’s headline titles (Call of Duty, World of Warcraft and Overwatch) exclusive to its platform. To do so would cut out enormous revenue streams, meaning that the acquisition would make no sense financially.

However, the CMA seems concerned that Microsoft’s ability to incentivise users to switch through promotions, optimisations, etc., is strong enough to warrant blocking the deal.

Bernardine Adkins, head of EU trade and competition at Gowling WLG, a law firm, suggests that the CMA’s decision did not come out of the blue:

Rather than representing any post-Brexit regulatory divergence by the CMA, this prohibition decision is the latest in a line of similar prohibitions for ‘killer acquisitions’ across a number of jurisdictions. As this deal would have presented a major foothold for thus far enterprise-centric Microsoft into the mobile/consumer market, Microsoft has unsurprisingly has said it will appeal.

However, Adkins added that decisions to completely block mergers may not be very common in the future. Instead, the focus could be more on regulation, which is easier to adjust – and does not take months of investigation into each case.

One cannot help but speculate as to whether the days of such prohibition decisions are numbered, at least for the digital giants. The EU and now the UK are migrating from the largely slow-moving and contentious application of the competition rules, and introducing a regulatory approach to check the market power of these players.

This begs the question as to whether an outright prohibition of an acquisition will be viewed as an outmoded instrument in such contexts. And so yesterday saw the issuance in the UK of the Digital Markets, Competition and Consumers Bill, which follows in the trail of the EU’s Digital Markets Act, and which promises to regulate digital players with ‘strategic market status’ – albeit by a different method to that of the EU but, some would argue with similar results.

One thing missing in Microsoft’s public criticisms of the UK is the comparison with the US.

The US Federal Trade Commission is suing to block the takeover of Activision Blizzard by Microsoft as well.

European authorities could also block the deal, although Microsoft’s Smith appeared confident the company could assuage EU concerns. Microsoft is expected to appeal the CMA’s ruling.

For the US political right (or at least the pro-big business part of the right that has survived Donald Trump’s takeover of the Republican party) the prospect of a British regulator blocking a deal between two US-headquartered companies is not welcome whatsoever.

Jay Clayton and Gary Cohn, two top officials in Trump’s administration, have written a joint opinion article for the New York Times (£) in which they accuse the UK Competition and Markets Authority (CMA) of being “the tail wagging the dog”.

They see the CMA decision as US Democrats “finding a way to substitute European Union regulation, which is more in line with progressive objectives, for US regulation”.

They wrote:

[T]he Federal Trade Commission, which is unapologetically anti-merger when it comes to Big Tech, has been using all available means to block the transaction. This includes making procedural choices that have, intentionally or not, allowed British regulators to step in and propose their own remedies.

[N]ow there is no doubt that a transaction involving two major US companies will have its timing and material terms dictated by Europeans.

There are some confusing aspects of the article – not least the fact that the CMA’s Microsoft decision appears to be used as evidence of the “European Union’s unprecedented power grab” over US companies.

Nevertheless, it shows how the UK’s approach to Big Tech has to strike a sensitive balance the British government’s desire for more muscular regulation with the geopolitical implications of regulating US-headquartered companies.

Sunak spokesman: Microsoft comments are not accurate

The market reaction to the government’s gambling reforms has so far been fairly limited.

Shares in Entain, the owner of brands like Ladbrokes and Coral, are up by 0.6% today. Flutter Entertainment, the owner of Paddy Power and Betfair, has dipped by 0.3%.

Entain has put out an initial statement welcoming the publication of the review, but adding that it will need detailed assessment. Flutter said it would have to look at it more closely before commenting.

Jette Nygaard-Andersen, Entain’s chief executive, said:

The UK Gambling Act Review is an important step towards having a robust regulatory framework that is fit for the digital age and creates a level playing field for all operators. We welcome the clarity that it will bring to the industry and customers.

She said the company had already brought in a “comprehensive range of actions to protect our customers”.

Entain also hints at a reason that the market reaction has been muted. The company said many of the proposals “align with actions that Entain has already implemented”. That includes Entain’s voluntarily paying 1% of UK gross gaming revenues to the UK government – suggesting the levy increase will not affect their financials too much.

Government reveals gambling reforms including online slot stake limits

Rob Davies