Despite its mission to promote both objectives, the Federal Trade Commission has become one of the biggest obstacles to competition and consumer welfare.
Starting with eliminating the decades-old consumer welfare standard at the FTC’s July 1, 202, meeting, the agency has been laser-focused on opposing every possible acquisition and merger, especially for large companies and regardless of their merits. That includes Meta’s acquisition of Within and Microsoft’s acquisition of Activision Blizzard.
FTC Chair Lina Khan’s actions and decisions have made her a “threat to free markets.” The agency has become so dysfunctional and biased that its only Republican commissioner, Christine Wilson, resigned in February 2023, noting that Khan “has consolidated power within the Office of the Chairman, breaking decades of bipartisan precedent and undermining the commission structure that Congress wrote into law.”
Wilson noted that Khan and her two fellow Democratic commissioners have stifled dissent, used “dishonesty and subterfuge to pursue her agenda,” and meddled in issues beyond the FTC’s statutory authority like its rulemaking to ban most noncompete clauses in employment contracts. And those same commissioners ignored three court cases that found an FTC chair or judge could not be involved in making decisions on cases in which they had made prior prejudicial statements or reviewed as a staffer in Congress, approving Khan’s refusal to recuse herself in Meta’s acquisition of Within despite saying that Meta should never be allowed to acquire anything before she joined the FTC.
The FTC argued in a lawsuit in July 2022 that the Meta acquisition would consolidate competition in the virtual reality marketplace. In February, the agency’s request for a preliminary injunction was denied by a federal District Court judge in California, and the acquisition has now been completed.
While Khan did not make the same blanket statement about Microsoft as she did about Meta, she has clarified that she will try to stop any mergers or acquisitions by “large” technology companies. Unsurprisingly, the FTC sued to block Microsoft’s acquisition of Activision Blizzard. Based on the outcome of the Meta case, it seems the FTC will face the same outcome and lose the case.
The Activision acquisition is also being considered in Europe by the European Commission, which decided not to require Microsoft to divest any assets to complete the deal, and the United Kingdom’s Competition and Markets Authority (CMA). In a survey about the acquisition, 75 percent of those who responded to the CMA were in favor, and six participants in the gaming industry told the CMA the acquisition would be a positive development, including strengthening competition with China.
Survey respondents in favor of the acquisition noted that it would increase competition against Sony and Nintendo, which “are stronger than Microsoft in console gaming,” and would not harm rival consoles since Microsoft has committed to keeping Activision content like “Call of Duty” non-exclusive. The company has previously made similar content available across all platforms and consoles. Respondents also suggested that the acquisition would be pro-competitive and reduce the cost of accessing games and that making “Call of Duty” exclusive to Microsoft’s Xbox would not make sense because it would cause the company to lose revenue from other platforms.
Proving the point about making “Call of Duty” available across platforms, Microsoft has already made non-exclusive agreements with major gaming companies Boosteriod Cloud, Nintendo, Nvidia and Xbox. But one holdout, Sony, has rejected Microsoft’s outreach and assurances that “Call of Duty” will continue to be available on Sony’s PlayStation.
Sony is not only refusing to come to any agreement but is actively opposing the merger and has acknowledged doing so. A March 15 article in Polygon cited Activision Blizzards’ Chief Communications Officer Lulu Cheng Meservey’s tweet that Playstation chief Jim Ryan said during a February 21 meeting of European Union regulators and interested parties in the acquisition, “I don’t want a new ‘Call of Duty’ deal. I just want to block your merger.”
The chances of approval for an acquisition or merger at the FTC are slim, especially for large companies. Meddling in this process, as Sony has been doing, will make matters even more complex and delay what most outside analysts and observers agree would be a positive development for consumers and competition.
The primary responsibility of the FTC is to determine whether an acquisition or merger will harm or benefit consumers, even though it has apparently decided that it is no longer the priority in its decision-making process. Nonetheless, the agency should look beyond the intra-industry fight and do what is in the best interests of competition, consumers, and video game creators and users by approving Microsoft’s acquisition of Activision Blizzard.