Microsoft and Activision’s verdict underscores Khan’s battle in opposition to know-how

FTC Chair Lina Khan speaks during the House Energy and Commerce Subcommittee’s Innovation, Data and Commerce Subcommittee hearing entitled “Oversight of the Securities and Exchange Commission” on Tuesday, April 18, 2023, at the Rayburn Building out of.

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When a federal judge on Tuesday decided to deny the Federal Trade Commission’s request for a restraining order Microsoft from the completion of the acquisition of Activision BlizzardShe also opposed FTC Chairwoman Lina Khan’s vision for antitrust enforcement.

While the judge’s decision doesn’t mean the deal is entirely clear, as the FTC can appeal and the UK competition regulator has also opposed the deal, it is indicative of the existential challenge that Khan’s enforcement strategy faces in court.

The fight against the $68.7 billion deal was one of the FTC’s biggest swings yet under Khan, who President Joe Biden appointed as chairman in 2021 Amazon.

But while many in Congress have become more receptive to a different perspective on antitrust law in the digital age, the courts still present a major stumbling block to newer theories about how online companies can amass and use power to suppress competitors.

Judge Jacqueline Scott Corley wrote that the FTC’s internal proceedings failed to show that it could prevail in the administrative challenge to the merger because the agency believed the deal was likely to significantly reduce competition. The FTC has argued that Microsoft may make some of its games exclusive to its own gaming consoles or affect the experience of Activision games on competing services should the deal go through. Microsoft has announced that it will instead make the games more widely available.

Corley agreed with Microsoft’s view.

“On the contrary, the record-breaking evidence suggests consumers are having more access to Call of Duty and other Activision content,” she wrote.

She added, “Despite the completion of an extensive investigation into the FTC’s administrative process, including the submission of nearly one million documents and 30 testimonies, the FTC has not identified a single document that contradicts Microsoft’s publicly stated commitment to making Call of Duty available.” .” PlayStation (and Nintendo Switch).”

The ruling means the parties are closer to completing their merger by July 18. However, the FTC can still appeal and the companies still have to deal with opposition to the deal from the UK’s Competition and Markets Authority.

“We are disappointed with this result as this merger clearly poses a threat to open competition in cloud gaming, subscription services and consoles,” an FTC spokesman said in a statement. “In the coming days, we will announce our next step to continue our fight to protect competition and protect consumers.”

It’s not the first time a judge has cast doubt on the FTC’s antitrust enforcement theories under Khan. A federal judge also ruled against the FTC’s attempt to block Meta’s acquisition of virtual reality fitness app maker Within Unlimited, arguing that it could hurt competition in an emerging market.

Khan has continued to file lawsuits against tech companies that will face similar hurdles in court. Most notably, the agency’s expected challenge to Amazon’s antitrust practices is likely to be the most notable.

Khan’s defense attorneys were quick to criticize Corley’s decision. Matt Stoller, research director at the American Economic Liberties Project, wrote on Twitter that Corley “changed the law” by writing that “the FTC must demonstrate that the merger is likely to significantly reduce competition.” Stoller pointed out that the relevant merger law states that the government must demonstrate that “the effects of such a takeover could potentially lead to a significant reduction in competition or the creation of a monopoly”.

“[W]”When a Biden judge – whose son works at Microsoft – allows the largest technology merger of all time, we have a serious problem with the judiciary,” Stoller wrote. Corley announced her son’s job, which isn’t in the gaming department, at a hearing in June.

Notwithstanding the criticism, the ruling is another example of a judge unconvinced by Khan’s theories about how a tech company can use acquisitions in adjacent markets to hurt competition. That is the case even if the judge was appointed by the same President who appointed Khan to the FTC.

As new digital competition laws stall in Congress, overcoming judges’ skepticism about newer theories about the application of existing laws will likely remain the biggest challenge for enforcement agencies.

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