#incipiency

Cloud gaming isn’t really a thing right now, but it might be. That was Microsoft’s bet, anyway, as it plonked down $69b to acquire Activision-Blizzard — a company that shouldn’t exist, having been formed out of a string of grossly anticompetitive mergers that were waved through.

Activision-Blizzard is a poster-child for the failures of antitrust law over the past 40 years, a period in which monopolies were tolerated and even encouraged by the agencies that were supposed to prevent monopolies from forming and break up the ones that slipped past their defenses. Activision-Blizzard is a giant, moribund company whose “innovation” consists of endless sequels to its endless sequels, whose market power allows it to crush its workers while starving competitors of market oxygen, ensuring that gamers and game workers have nowhere else to go.

Microsoft is another one of those poster-children, of course. After being convicted of antitrust violations, the company dragged out the legal process until George W Bush stole the presidency and decided not to pursue them any further, letting them wriggle off the hook.

The antitrust rough ride tamed Microsoft…for a while. The company did not use the same dirty tricks to destroy, say, Google as it had used against Netscape. But in the years since, Microsoft has demonstrated that it regrets nothing about its illegal conduct and has no hesitations about repeating that conduct.

This is especially true of cloud computing, where Microsoft is using exclusivity deals and illegal “tying” (forcing customers to use a product they don’t want in order to use a product they desire) to lock customers into its cloud offering:

https://www.reuters.com/technology/google-says-microsofts-cloud-practices-anti-competitive-slams-deals-with-rivals-2023-03-30/

Locking customers into Microsoft’s cloud also means locking customers into Microsoft surveillance. Microsoft’s cloud products spy in ways that are extreme even by the industry’s very low standards. Office 365 isn’t just a version of Office that you never stop paying for — it’s a version of Office that never stops spying on you, and selling the data to your competitors:

https://pluralistic.net/2020/11/25/the-peoples-amazon/#clippys-revenge

Microsoft’s Activision acquisition was entirely cloud-driven. The company clearly believes the pundits who say that the future of gaming is in the cloud: rather than playing on a device with the power to handle all the fancy graphics and physics, you’ll use a low-powered device that streams you video from a server in the cloud that’s doing all the heavy lifting.

If cloud gaming comes true (a big if, considering the dismal state of broadband, another sector that’s been enshittified and starved by monopolists), then Microsoft owning the Xbox platform, the Windows OS, and the Game Pass subscription service already poses a huge risk that the company could grow to dominate the sector. Throw in Activision-Blizzard and the future starts to look very grim indeed.

It’s a nakedly anticompetitive merger. As Mark Zuckerberg unwisely wrote in an internal memo, “it is better to buy than to compete.”

(These guys can not stop incriminating themselves. FTX got mocked for its group-chat called “Wirefraud,” but come on, every tech baron has a folder on their desktop called “mens rea” full of files with names like “premeditation-11.docx.”)

Naturally, the FTC sued to stop the merger (after 40 years, the FTC has undergone a revolution under chair Lina Khan and is actually protecting the American people from monopoly):

https://www.vice.com/en/article/ake97g/ftc-sues-to-block-microsoft-acquisition-of-call-of-duty-publisher-activision-blizzard

The FTC was always in for an uphill battle. “Cloud gaming,” the market it is seeking to defend from monopolization, doesn’t really exist yet, and enforcing US antitrust law against monopolies over existent things is hard enough, thanks to all those federal judges who attended luxury junkets where billionaire-friendly “economists” taught them that monopolies were “efficient”:

https://pluralistic.net/2021/08/13/post-bork-era/#manne-down

But the FTC isn’t the only cop on the beat. Antitrust is experiencing a global revival, from the EU to China, Canada to Australia, and South Korea to the UK, where the Competition and Markets Authority is kicking all kinds of arse (see also: “ass”). The CMA is arguably the most technically proficient competition regulator in the world, thanks to the Digital Markets Unit (DMU), a force of over 50 skilled engineers who produce intensely detailed, amazingly sharp reports on how tech monopolies work and what to do about them.

The CMA is very interested in cloud gaming. Late last year, they released a long, detailed report into the state of browser engines on mobile phones, seeking public comment on whether these should be regulated to encourage web-apps (which can be installed without going through an app store) and to pave the way for cloud gaming:

https://pluralistic.net/2022/12/13/kitbashed/#app-store-tax

The CMA is especially keen on collaboration with its overseas colleagues. Its annual conference welcome enforcers from all over the world, and its Digital Markets Unit is particularly important in these joint operations. You see, while Parliament appropriated funds to pay those 50+ engineers, it never passed the secondary legislation needed to grant the DMU any enforcement powers. But the DMU isn’t just sitting around waiting for Parliament to act — rather, it produces these incredible investigations and enforcement roadmaps, and releases them publicly.

This turns out to be very important in the EU, where the European Commission has very broad enforcement powers, but very little technical staff. The Commission and the DMU have become something of a joint venture, with the DMU setting up the cases and the EU knocking them down. It’s a very heartwarming post-Brexit story of cross-Channel collaboration!

And so Microsoft’s acquisition is dead (I mean, they say they’ll appeal, but that’ll take months, and the deal with Activision will have expired in the meantime, and Microsoft will have to pay Activision a $3 billion break-up fee):

https://mattstoller.substack.com/p/big-tech-blocked-microsoft-stopped

This is good news for gaming, for games workers, and for gamers. Microsoft was and is a rotten company, even by the low standards of tech giants. Despite the sweaters and the charity (or, rather, “charity”) Bill Gates is a hardcore ideologue who wants to get rid of public education and all other public goods:

https://pluralistic.net/2021/04/13/public-interest-pharma/#gates-foundation

Microsoft has a knack for nurturing and promoting absolutely terrible people, like former CEO Steve Ballmer, who has played a starring role in Propublica’s IRS Files, thanks to the bizarre tax-scams he’s pioneered:

https://pluralistic.net/2023/04/24/tax-loss-harvesting/#mego

So yeah, this is good news: Microsoft should have been broken up 25 years ago, and we should not allow it to buy its way to ongoing dominance today. But it’s also good news because of the nature of the enforcement: the CMA defended an emerging market, to prevent monopolization.

That’s really important: monopolies are durable. Once a monopoly takes root, it becomes too big to fail and too big to jail. That’s how IBM outspend the entire Department of Justice Antitrust Division every year for twelve years during a period they call “Antitrust’s Vietnam”:

https://onezero.medium.com/jam-to-day-46b74d5b1da4

Preventing monopoly formation is infinitely preferable to breaking up monopolies after they form. That’s why the golden age of trustbusting (basically, the period starting with FDR and ending with Reagan) saw action against “incipient” monopolies, where big companies bought lots of little companies.

When we stopped worrying about incipiency, we set the stage for today’s Private Equity “rollups,” where every funeral home, or veterinarian, or dentists’ practice is bought out by a giant PE fund, who ruthlessly enshittify it, slashing wages, raising prices, stiffing suppliers and reducing quality:

https://pluralistic.net/2022/12/16/schumpeterian-terrorism/#deliberately-broken

Limiting antitrust enforcement to policing monopolies after they form has been an absolute failure. The CMA knows that an ounce of prevention is worth a pound of cure — indeed, we all do.

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[Image ID: A promotional image from the Call of Duty franchise featuring a soldier in a skull-mask gaiter giving a thumbs up on a battlefield. It has been altered so that he is giving a thumbs-down gesture. Superimposed on the image is a modified Microsoft 'Clippy' popup; Clippy's speech-bubble has been filled with grawlix characters; the two dialog-box options both read 'No.']