Britain’s bureaucrats have done it again. They’ve helped snatch defeat out of the jaws of victory.
The decision by Britain’s Competition and Markets Authority (CMA) to quash Microsoft Inc’s planned takeover of video game maker Activision Blizzard ATVI is just the latest fumble by the UK government. And together with a similar action by another British government agency, it could have a lasting and detrimental impact on the UK economy unless something changes soon. The action also trashes the Brexit promise of a more benign regulatory environment.
It is “probably the darkest day in our four decades in Britain,” Brad Smith, Microsoft’s president, told the BBC in an interview broadcast earlier today. “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.”
Even more insulting to the Brits he said that the European Union, typically viewed as a Bureaucratic mess from London, is a better place to do business. “There’s a clear message here – the European Union is a more attractive place to start a business than the United Kingdom,” Smith said.
The problem isn’t about the decision but more about how opaque the process was for Microsoft in attempting to get the approval. In most developed countries, like those in the EU and the U.S., regulators work closely with companies to make changes in business practices to address worries about lack of market competition.
However, in this case, CMA abruptly stopped the dialogue with Microsoft without warning, according to Smith.
The CMA differed, saying it was “It is the CMA’s job to do what is best for the people, businesses and economy of the UK, not merging firms with commercial interests,” according to the BBC.
That may well be sincere. But when you put the recent CMA actions in context it doesn’t look good. In other words, the optics are all wrong when you look at the British government.
In January, another UK regulator, the Gambling Commission, decided not to renew Camelot Group’s right to run Britain’s National Lottery.
Again, it wasn’t the decision that was the problem but rather the need for more transparency, according to a major investor. “We were disappointed by the process and the outcome for the lottery,” Jo Taylor CEO of Ontario Teachers’ Pension Plan, told the UK-based Times newspaper earlier this month. The company manages assets worth approximately a quarter of a trillion Canadian dollars.
A transparent process is essential to all investors as they want to know what to expect. In both the cases mentioned above, investors didn’t feel that was happening.
Unless Britain’s bureaucracy changes its ways radically, likely, many other investors won’t even attempt to deal with UK government regulators in the future. Instead, they’ll invest their money in other countries where the process for government approvals is transparent and predictable. The result will be a poorer economy.
I add to this my own experience in the UK trying to get government approvals for building construction. In that case, I found the process opaque, misleading, and costly. That experience is why I believe that Microsoft’s Smith has a fair point that needs to be addressed as quickly as possible. If not, Britain will suffer.
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