This legal challenge is not traditional behaviour from the FTC, and the conclusion of the case could be indicative of future interactions between big tech and antitrust regulators. Corporate America has its eyes on this case.
Traditionally, the FTC has tended to abide by the “consumer welfare” standard of antitrust. Essentially, this means that if an acquisition isn’t predicted to affect the price of products, then there isn’t a problem. This attitude changed with Joe Biden’s appointment of Lina Khan (34) as chair of the FTC, the youngest ever to hold the role.
Khan earned some notoriety as a law student for a 2017 article in which she argued that Amazon was a monopolist. She then went on to work for Congress, in academia, and for a think-tank before taking on her current role.
Another prominent figure in the FTC, Jonathan Kanter, was also appointed by the Biden administration. Kanter, who has previously fought Google, heads up the Commission’s antitrust division. The signal from the administration was clear: the FTC was going to be harder on big business, especially in tech.
Khan and her colleagues have reframed thinking at the FTC. Rather than just looking at price implications, other harms are also being considered, like the potential damage to labour and small businesses caused by market consolidation. There is a particular interest in ensuring big companies can’t stop new competitors from emerging through market dominance. This was Khan’s rationale for her unsuccessful challenge to Meta’s acquisition of Within, a budding virtual reality fitness company. A judge refused the FTC’s request for an injunction and the acquisition proceeded.
So, while the Microsoft acquisition would’ve likely proceeded without challenge prior to Khan’s tenure, it has now become a bugbear for the Commission. As we’ve heard continuously for the past year, the FTC’s primary concern is the exclusivity status of Call of Duty. The Commission worries that an Xbox exclusive Call of Duty will harm competition in the video game industry.
There is also concern regarding the future of Game Pass, which could potentially burgeon into a dominant cloud gaming service. The FTC worries that the future of Game Pass combined with the library of games provided by the Activision-Blizzard deal will make Microsoft an unassailable leader in cloud gaming.
Of course, Phil Spencer has said numerous times that he’s willing to work out a deal with PlayStation to keep Call of Duty on the platform for at least a decade. The problem? The FTC doesn’t believe him. The Commission has cited Microsoft’s acquisition of ZeniMax as an example of its antitrust behaviour, with games such as Redfall and Starfield becoming Xbox exclusives.
The government’s case may be struggling, however. Microsoft is in third place in the console market behind Sony and Nintendo, a combined Microsft-Activision-Blizzard is estimated to only earn 14% of global gaming revenue, and if Xbox can come to a legal arrangement with Sony regarding Call of Duty, then the judge may not see strong enough evidence to provide the FTC with the injunction they desire.
As it stands, US District Judge Jacqueline Scott Corley is deciding whether to grant a preliminary injunction to halt the deal. Microsoft and Activision-Blizzard have essentially agreed that if the deal isn’t done by July 18, then it will be terminated. Judge Corley has said she doesn’t have a firm date for her decision, but she is mindful of the timeline.
This is a big moment for Khan and her like-minded colleagues at the FTC. If granted the injunction, it will be seen as a great antitrust victory. If Judge Corley decides otherwise, it will be another defeat for the FTC and unfortunately for antitrust, continuously losing cases can damage any legal cause.
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Source: https://www.dualshockers.com/why-ftc-targetting-microsoft-activision-blizzard-deal/
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