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UK’s Antitrust Authority to probe Microsoft’s acquistion of Nuance

Antitrust officials in the United Kingdom on 13th of December, 2021 announced that they are launching a probe into Microsoft’s $16 billion acquisition of voice recognition company, Nuance, the latest indication that they are increasing their scrutiny of big technological acquisitions.

Microsoft announced intentions to buy Nuance, a speech-to-text expert, in April of 2021, to expand its cloud services for healthcare. The deal, which was scheduled to finalize this year, would be Microsoft’s second-largest acquisition after the $26 billion purchase of LinkedIn by the software giant in 2016.  Microsoft made it known in a statement that Nuance’s technology will be used to supplement its cloud healthcare offerings, which were unveiled last year. The acquisition was driven by Nuance’s healthcare technologies, according to Microsoft CEO Satya Nadella.

“In healthcare, Nuance delivers the AI layer at the point of delivery and is a pioneer in the real-world use of corporate AI”. He added that “AI is the most critical goal for technology, and healthcare is its most pressing application.” As we accelerate the growth of Microsoft Cloud for Healthcare and Nuance, we will put powerful AI solutions into the hands of professionals all across the world to enable better decision-making and create more meaningful relationships.”

“Over the past three years, Nuance has streamlined its portfolio to focus on the healthcare and enterprise AI segments, where advanced conversational AI and ambient solutions have seen increased demand,” – Mark Benjamin, Nuance’s CEO.

The agreement has already been approved without conditions by regulators in the United States and Australia. This grabbed the attention of the UK’s active antitrust regulator, which said it would take a preliminary look at the planned acquisition to see if there were any red flags. Microsoft is also rumoured to be in talks to buy Discord, a popular messaging app, for over $10 billion. Furthermore, Microsoft attempted to purchase TikTok’s U.S. business for almost $30 billion last year, but the deal did not fall through. Microsoft concluded its $7.6 billion purchase of gaming company Zenimax last month.

The Competition and Markets Authority (CMA), which has been tightening its grip on Big Tech, said it was looking into whether the merger will reduce competition in the UK market. In due course, the Competition and Markets Authority (CMA) will decide on whether to begin a phase 1 inquiry. Currently, there is no set deadline for the agency to make a judgment but the CMA is holding a consultation process until January 10, 2022, during which interested parties can submit comments.

Regulators in the United Kingdom have increased their scrutiny of technology acquisitions. Last month it ordered Facebook, now known as Meta, to reverse its purchase of Giphy (an online database and search engine which allows users to search for and share short looping videos with no sound), and resell the GIF-sharing platform, claiming that the agreement stifles competition for animated photos and harms social media users and advertisers.

The tie-up between Facebook and Giphy has already removed a potential contender in the display advertising industry,” Stuart McIntosh, chair of the independent investigation panel overseeing the CMA examination, said in a statement. If nothing is done, Facebook’s already significant economic dominance in social media will be bolstered even more by limiting competitors’ access to Giphy GIFs.

“By forcing Facebook to sell Giphy, we are protecting millions of Facebook users while simultaneously supporting competition and innovation in digital advertising,” he continued.

Facebook had previously stated that it would invest in further tech development for Giphy, as well as forge new relationships with content creators and endpoint developers. Giphy already obtains 50% of its traffic from Facebook’s apps, including Instagram, Messenger, the Facebook app itself, and WhatsApp, according to the business.

Moving on, Microsoft said it was buying Nuance to strengthen its presence in the healthcare vertical, where Nuance has developed several clinician-support products, (such as tech for documenting telehealth visits; a speech recognition tool for clinical documentation; and AI-powered radiology reporting, among other software tools).

In a statement, the CMA stated that it is “considering whether it is or may be the case that this transaction if carried out, will result in the creation of a relevant merger situation under the merger provisions of the Enterprise Act 2002 and, if so, whether the creation of that situation may be expected to result in a significant lessening of competition within any market or markets in the United Kingdom for goods or services.”

The antitrust authority in the United Kingdom may decide that the intended merger warrants further inquiry, at which time a phase 1 investigation would be launched. If it determines that there is still cause for worry, it may launch a phase 2 probe.

It may also decide that there are no competition issues to be concerned about during one of the stages of its process and clear the transaction. On the other hand, if it has reservations, it may decide that remedies are required before proceeding, or it may even order the transition to be halted.

Meanwhile, the United Kingdom is retooling domestic competition law to account for platform power and has stated that it will implement a “pro-competition” regime to protect smaller innovators from the market muscle of tech behemoths.

The competition watchdog continues to monitor M&A activity and other important initiatives (such as Google’s strategic “Privacy Sandbox”) ahead of legislation to empower a new Digital Markets Unit,  which sits inside the CMA, to oversee big tech.`

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