Senior Vice President, International Regulatory Affairs & Antitrust, U.S. Chamber of Commerce
June 13, 2023
It wasn’t that long ago that antitrust experts looked at Europe and thought that it was a font of questionable antitrust enforcement decisions. Sadly, the FTC now makes Europe look sensible. The FTC has decided to challenge the Microsoft-Activision merger. Microsoft, by any measurement, is a minor player in gaming for both consoles and game design. Yet, the FTC has chosen to attempt to block the deal claiming that Microsoft might frustrate rival consoles’ access to Activision’s popular game titles. There is no evidence that this is likely to happen and lots of reason to believe doing so would not be in Microsoft’s shareholder’s interest.
However, the European Commission rejected the FTC’s concerns about harm to the console gaming business, but had a narrower concern focused on the very nascent cloud gaming segment. Microsoft agreed to a ten-year free license to consumers to allow them to stream all Activision games for which they have a license via any cloud service. According to Margarethe Vestager, the European Commissioner for Competition, this remedy “fully addressed our concerns” and had “significant pro-competitive effects.” As Vestager explained, the remedy “opens the door for smaller cloud services in the EU to offer big games on their platforms, widening choice for gamers.” Moreover, the remedy received broad support “across the spectrum - by developers, by cloud gaming providers, by distributors and of course also by consumer groups. And that is because it unlocked the potential of the cloud market.”
Yet, the FTC has refused to follow suit and consider such a remedy, instead choosing to attempt to block the deal outright, a decision that will not likely be upheld in court. Why not force Microsoft into a legally binding condition and approve a merger that even the EC believes is “positive development”? Because the Federal Trade Commission’s current leadership has effectively declared “war” on mergers, targeting vertical mergers that would benefit the competitiveness of U.S. companies.
The list is long: Nvidia-Arm, Lockheed-Aerojet, Meta-Within, Illumina-Grail, and now Microsoft-Activision. These are all vertical mergers that, if consummated, would have improved the global position of U.S. companies in various markets, including chip design, rocket motors for missiles, the metaverse, cancer treatments, and the gaming industry.
Unfortunately, merger review has reached a point where the FTC’s is now beginning to undermine our national interest in globally competitive companies. To be clear, antitrust agencies should examine mergers. After all, antitrust law protects consumers, not the companies seeking to merger, nor their competitors. Further, in the U.S., unlike some other countries, our laws do not and should not give preferential treatment aimed at promoting “national champions.” If the evidence shows that a merger would harm consumers, it should be modified in such a way as to address the consumer harm, if that is not possible it should be blocked. But merger review shouldn’t be used to attack companies or engineer bureaucratic hurdles to economic freedom, progress, and growth.
Policymakers should start to ask themselves whether the FTC’s aggressive agenda, grounded in speculative theory and anti-merger dogma rather than evidence, continues to serve the nation’s interests. How does blocking these vertical mergers, with no evidence of competitive harm, benefit America’s interest. In short, it does not.