FTC Chair Lina Khan’s Vision of Antitrust Enforcement Challenged by Judge’s Ruling
A federal judge recently rejected the Federal Trade Commission’s (FTC) request for a preliminary injunction to halt Microsoft’s acquisition of Activision Blizzard. This ruling not only jeopardizes the deal but also undermines FTC Chair Lina Khan’s approach to antitrust enforcement.
Although the judge’s decision doesn’t guarantee the deal’s completion, as the FTC can appeal and the UK’s competition enforcer has also expressed opposition, it highlights the difficulties Khan’s enforcement strategy faces in the courts.
The FTC’s opposition to the $68.7 billion deal is a significant move by Khan, who was appointed as chair by President Joe Biden in 2021. Khan gained recognition for critiquing how antitrust enforcement ignored potential abuses by Amazon.
Despite growing support in Congress for a reconsideration of antitrust in the digital era, the courts remain a major obstacle to new theories about the accumulation and utilization of power by online companies to stifle competitors.
Judge Jacqueline Scott Corley ruled that the FTC failed to demonstrate a high likelihood of success in its administrative challenge of the merger. The FTC argued that Microsoft might limit certain games to its own consoles or undermine the gaming experience on rival platforms if the deal goes through. Microsoft, on the other hand, vowed to increase the availability of games.
Corley sided with Microsoft, stating that the evidence indicates improved consumer access to Activision content, including Call of Duty. She emphasized that the FTC, despite extensive discovery efforts, failed to produce any documents contradicting Microsoft’s commitment to making Call of Duty available on platforms like PlayStation and Nintendo Switch.
The ruling brings Microsoft and Activision closer to finalizing their merger by their July 18 deadline. However, the FTC retains the option to appeal, and the companies must address the UK Competition and Markets Authority’s objections to the deal.
Expressing disappointment, an FTC spokesperson highlighted the merger’s potential threat to competition in cloud gaming, subscription services, and consoles. Microsoft’s President and Vice Chair, Brad Smith, expressed gratitude to the San Francisco Court for its swift decision and urged other jurisdictions to work towards a timely resolution. He reiterated Microsoft’s commitment to addressing regulatory concerns collaboratively and creatively.
This ruling is not the first instance where a judge has cast doubt on the FTC’s antitrust enforcement under Khan. A federal judge previously rejected the FTC’s attempt to block Meta’s acquisition of Within Unlimited, a virtual reality fitness app maker, citing concerns about competition in an emerging market.
Khan is expected to face similar challenges when bringing cases against tech companies, particularly in the agency’s anticipated challenge of Amazon’s antitrust practices.
Critics of the ruling questioned Corley’s interpretation of relevant merger law and suggested potential conflicts of interest due to her son’s employment at Microsoft, albeit not in the gaming division.
Nevertheless, the ruling underscores the skepticism among judges regarding Khan’s theories on how a tech company can exploit acquisitions in adjacent markets to harm competition. This skepticism persists even when the judge is appointed by the same president who appointed Khan to the FTC.
With new digital competition laws stagnant in Congress, convincing judges to embrace novel interpretations of existing laws will likely remain the biggest challenge for antitrust enforcers.
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