Microsoft’s Activision Acquisition To Go Ahead - Sanity And The Law Prevail Over Baseless Demagoguery And Political Point Scoring
The mostly leftwing effort to clip Big Tech's wings and simultaneously bring antitrust enforcement back to the forefront of American economic policymaking had another reversal, this week.
That is all to the good for a few reasons but our fear is that it may not matter since winning may not be the ultimate aim of the current policy antitrust crusade against Big (US) Tech.
You may have seen that the Federal Trade Commission (FTC) lost its attempt to stop Microsoft from purchasing Activision Blizzard for $69 billion.
The FTC is appealing but the deal will now likely go through. They didn't have a legal argument to begin with and it seems unlikely to change now that a federal judge has found what everyone predicted.
Editor's note: the FTC also lost the appeal.
There are a few things to say about this ruling both narrowly and otherwise.
This ruling is great for gamers everywhere.
It is also good for Microsoft but more importantly, it is bad news for Sony.
It is great for all of us who care about a fair and unpoliticized antitrust regime.
It might be bad overall for the American economy.
Let us dive in.
On the surface this is yet another embarrassing ruling against the highly politicized FTC under Lina Khan. This makes the 4th time in the last year where a federal judge - in this case a judge appointed by President Biden no less - has ruled against the FTC due to the basic merits of the case.
We already wrote about this topic recently and argued that the issue isn't that antitrust enforcement is wrong. To the contrary, it is both important and likely underused tool in the modern state's mission to ensure an open and free market. However, if the best we can do is shallow ideology and vindictive campaigns against companies considered "bad" rather than the legal merits of the proposed merger or acquisition.
This is a bad look on a few fronts. The biggest one is the government keeps trying to bring cases that are judged to be without legal merit.
The list of failures is impressive. A short summary might be:
Then the FTC's own administrative judge ruled that their argument against Illumina's attempt to purchase Grail that the facts didn't come close to supporting the government's theory (the FTC overruled their own judge subsequently).
The argument that Google and Meta constitute an online advertising "duopoly" also isn't born out by the facts as we have covered before.
The case against Microsoft amusingly had some new elements of all of these problems:
First off, the argument that it will be bad for consumers was pretty difficult to make when they will likely gain quite a bit.
As the ruling judge, Judge Jacqueline Scott Corley pointed out:
“Before the merger, a consumer wanting to play a Call of Duty console game had to buy a PlayStation or an Xbox. After the merger, consumers can utilize the cloud to play on the device of choice, including, it is intended, on the Nintendo Switch. Perhaps bad for Sony. But good for Call of Duty gamers and future gamers.”
It might be just us but the fact that so much attention has been paid to gaming consoles and who can play on which ones is quite something. How long will gaming consoles even be a thing?
Second, the idea that despite Microsoft executives stating in public and under oath, that they will keep Activision games on Sony's playstation doesn't hold much water from an economic stand point either.
Sony is the largest console vendor out there and so removing content from their ecosystem would be both expensive and self-defeating. The intrinsic value of playing the same game across multiple platforms is part of Call of Duty (and other games' appeals).
Microsoft may not love Sony but they do love people playing their video games as much as possible.
Third, this whole case was rather weird and politicized and not in a good way.
The US government's lawyers were explicitly arguing in a court of law in favor of a huge Japanese multinational and against an American one. We get that huge global companies are hardly in need of government legal aid or much sympathy generally speaking but it is quite another thing to be actively trying to help their foreign rivals.
This was particularly noticeable since the FTC called and relied heavily upon the testimony from a Sony executive, Jim Ryan.
"The FTC’s heavy reliance on Mr. Ryan’s testimony is unpersuasive.....Sony opposes the merger; its opposition is understandable."
It may be us but this is pretty weird. American companies can be both greedy and monopolistic sure but relying on the interests of foreign companies is probably not an answer.
Out of curiosity, how much antitrust enforcement do the Japanese carry out?
Fourth, it was a good for those of us who believe in the rule of American law and generally the fact that it should apply to everyone, fairly, not just those the government favors.
It often seems to us as if the only thing that still works very well in America are its (good) companies. It would be wonderful to feel that the courts can be added to that list and that both can work in concert for the good of the country.
Whether that is true or not, it would be wonderful if the US government didn't actively try and slow them down via regulation. The aim shouldn't be to make US corporations like the US government but the inverse.
Where does this leave us?
Well for one thing, it is great for those who enjoy Call of Duty. Not only will you be able to still play it on Sony Playstation but also the Xbox and the Nintendo Switch apparently.
It is bad news for Sony. They were the company that had the most to gain from halting this merger and that is, once again, pretty strange that the US government was fighting their corner so hard.
It is great for those who hope for sane rule of law from the increasingly under fire US legal system. This is a real comparative advantage at this time, let us protect it.
It is yet another defeat for Lina Khan's FTC. In fact, these defeats are coming so frequently and so completely that it has given us pause about celebrating too loudly.
We may be wrong but just what is the FTC (and broader US government) trying to accomplish with their attempt to broaden and reinvent muscular antitrust enforcement.
Specifically, we have been wondering since we last wrote on this subject whether perhaps we are missing the point of all of these legally weak cases. Each time they happen we look at them their merits and think that the government will probably lose (again) but reflect that we are not lawyers and so perhaps we have it wrong.
However, as the losses pile up, we have been coming around to the idea that winning legally may not be the end goal. Rather, Ms. Khan may not mind the embarrassment since her ultimate goal is not to make good legal arguments but instead simply to throw sand in the gears of American business.
The FTC's constant lawsuits are creating a lot of regulatory uncertainty that will, regardless of whether the Commission wins or loses, cause companies to have second thoughts before attempting acquisitions and mergers.
Once you start thinking about them this way then the fact that they seem to "sue first and worry about the evidence later" makes a lot more sense.
And, in the end, this isn't great? Even before we get to the fact that the FTC is, of course, only doing so along Democratic talking points. You might like those policy aims perhaps but keep in mind that the Republicans will eventually be in control once again and you might enjoy their own approach far less.
Harming the economy and politicizing it at the same time is a tough 1-2 to have as your regulatory legacy.....
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