Judge Strikes Another Blow Against Biden’s Activist FTC With Ruling in Microsoft-Activision Merger

Lina Khan has been aggressively crusading against what she has called ‘exploitative,’ ‘collusive,’ and ‘abusive’ tactics in the technology industry since she took over the FTC in 2021 with little to show for it.

AP/Peter Morgan
An image from Activision's Call of Duty is shown on a smartphone near a photograph of the Microsoft logo. AP/Peter Morgan

A federal judge in California struck another blow against President Biden’s activist Federal Trade Commission chief, Lina Khan, by denying a government request to block Microsoft’s pending acquisition of gaming giant Activision Blizzard.

Judge Jacqueline Scott Corley of California’s Northern District said Tuesday the FTC failed to make a compelling case that the $70 billion deal between the two tech giants would harm consumer choice in the video game market. She denied the agency’s request for a preliminary injunction blocking the transaction until it could fight the merger at an internal court.

“The FTC has not raised serious questions regarding whether the proposed merger is likely to substantially lessen competition in the console, library subscription services, or cloud gaming markets,” Judge Corley wrote.

Consumer advocates praised the ruling as yet another rebuke for Ms. Khan, one of the more activist FTC leaders in recent memory. A Biden appointee, Ms. Khan has been crusading against what she has called “exploitative,” “collusive,” and “abusive” tactics in the technology industry, using the FTC’s antitrust oversight as her primary bludgeon. Another judge blocked the FTC’s attempt earlier this year to stop Meta from taking over a virtual reality fitness company, Within Unlimited.

“The FTC set out, it seems, to protect the business interests of Sony’s PlayStation, completely ignoring their duty to regulate in the interest of American consumers,” the media director for the Consumer Choice Center, Stephen Kent, said. “President Biden should be taking note of how poor FTC Chair Lina Khan has been at her job, and how far she’s strayed from the mission of consumer protection.”

The Washington-based Taxpayers Protection Alliance was even less charitable toward the FTC, saying its case against the merger was part of a “radical agenda” and “predicated on questionable legal theories, manifestly flawed expert testimony, and scant hard evidence.”

“FTC Chair Lina Khan will testify before Congress in less than 48 hours,” the group said in a statement. “Taxpayers have a right to know why her agency is wasting taxpayer funds on frivolous lawsuits against American companies that play a crucial role in the modern economy. Khan has asked for a huge bump in funding for her agency. Congress should reject that request if Khan plans on using it to further these sorts of ideologically driven vanity projects.”

Things did not appear to be going well for the government’s case during a five-day hearing on the deal at San Francisco last month. The chief executives of both Microsoft and Activision testified that they intend to keep Activision’s most successful franchise, the “Call of Duty” video game, available to consumers regardless of what platform they use. Much of the FTC’s case revolved around fears that “Call of Duty” would become unavailable to users of the Sony Playstation console, the main rival to Microsoft’s Xbox.

In her 53-page ruling, Judge Corley said the merger deserved scrutiny but that the scrutiny has paid off. “Microsoft has committed in writing, in public, and in court to keep Call of Duty on PlayStation for 10 years on parity with Xbox,” she said. “It made an agreement with Nintendo to bring Call of Duty to Switch. And it entered several agreements to, for the first time, bring Activision’s content to several cloud gaming services.”

“In many ways you won,” Judge Corley said during the proceedings, to which the FTC’s lead trial attorney on the case, James Weingarten, replied, “I don’t think we won.” Mr. Weingarten disputed the notion that what he called “hastily agreed to” contracts would sufficiently protect the market.

Executives at Activision and Microsoft welcomed the ruling. The chief executive of Activision, Bobby Kotick, said the merger would “enable competition rather than allow entrenched market leaders to continue to dominate” in a statement released after the ruling. Microsoft’s president, Brad Smith, said on Twitter that the company is “grateful to the Court in San Francisco for this quick and thorough decision.”

Several other countries and the European Union have already approved the merger, and Tuesday’s ruling appeared to give pause to regulators in the only market still holding out — the United Kingdom. Britain’s Competition and Markets Authority earlier opposed the deal and had scheduled a hearing on the matter for later this month.

After the California ruling, though, the authority said it was putting that hearing on hold in order to work out its differences with the principals involved in the transaction. “We stand ready to consider any proposals from Microsoft to restructure the transaction in a way that would address the concerns” outlined in the merger decision, the CMA said in a prepared statement.

The New York Sun

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