In the year since Joe Biden became US President, his rival supporters have talked a lot about getting tough on Big Tech and oligopolies, but they have taken relatively few concrete actions.
Supporters of Lina Khan, chair of the Federal Trade Commission, defended her apparent inactivity by saying she took time to study the agency. Critics are asking why the FTC and the Department of Justice, which share responsibility for antitrust enforcement, are sitting on their hands at a time when mergers and acquisitions are breaking records, which last year reached $ 5 billion worldwide and $ 2.6 billion in the US alone.
Microsoft has now faced a juicy challenge with the largest acquisition in its history – a $ 75 billion agreement for video game maker Activision Blizzard. The announcement came hours before a pre-scheduled FTC and DoJ news conference last week where the watchdogs promised to rewrite merger rules to cage offensive combinations.
This deal deserves close scrutiny by U.S. regulators: Microsoft, Nintendo and Sony dominate the gaming console market, and investors were so concerned about the impact of the bond that they dropped Sony shares by 13 percent.
Yet the watchdogs should not anticipate the answer. It is a vertical merger involving a platform and a distributor, an area where the law is particularly complex. The Trump administration’s attempt in 2019 to block AT & T’s purchase of Time Warner completely flopped, and Khan’s FTC withdrew its vertical merger guidelines last year.
Analyzing whether the transaction should be blocked should also take into account that consoles are not the only way to play games. There are other distribution systems, including streaming, smartphones and computers, and many content producers. In that broader context, the Microsoft-Activision combination seems much less powerful. Regulators have a difficult task as they consider this rapidly evolving market and try to predict the competitive forces that will shape it.
Watchdogs did not realize the potential impact of Facebook’s purchases of Instagram in 2012 and WhatsApp in 2014 and blew them away. They are now so sorry about those decisions that the FTC is sue to undo they. They must not allow that mistake to be repeated. Retrospective application years later would be the worst outcome because it can not completely undo the damage to competition and U-turns sow confusion in the market. The contrast between the US approach to mergers so far and the stricter line followed by the EU and the UK has only contributed to the uncertainty.
Biden has promised to reform U.S. policy and adopt a broader view of consumer harm that looks beyond higher prices. Congress is also moving like this: the Senate Judiciary Committee voted last week to promote a two-party bill designed to prevent platform companies from giving preferential treatment to their own products and services.
The U.S. government is already on a collision course with the largest companies in Silicon Valley. Google and Facebook owner Meta are already fighting federal antitrust lawsuits, and Apple CEO Tim Cook has personally campaigned against the Senate bill.
The merger of Microsoft-Activision is the right moment for the FTC and DoJ to spell out what they think difficult merger investigation really means. If they choose to let the deal go through, the government must clearly explain why and what kind of acquisitions would not succeed. They must also ensure that any conditions are properly enforceable. If the watchdogs conclude that the bonding would be uncompetitive, they should proceed without fear. As Khan said last week, “You lose all the shots you do not take.”