Microsoft’s couldn’t have picked a more inauspicious day to announce its planned acquisition of gaming company, Activision Blizzard. The news came concurrently with antitrust regulators at the Federal Trade Commission (FTC) and the Department of Justice announcing their intent to rewrite and expand merger rules to “accurately reflect modern market realities.”
Across town, the reception to Microsoft’s news on Capitol Hill was oddly warm, even from those who support antitrust legislation aimed at other big tech firms. Ranking Republican on the House Judiciary antitrust subcommittee, Rep. Ken Buck of Colorado, told The Washington Post: “If the company keeps its word, I believe that the increase in competition in the gaming marketplace would be in keeping with the aims of my legislation.”
Microsoft may have successfully steered clear of the “bias against conservatives” fight that’s landed Amazon, Apple, Facebook, and Google in the antirust crosshairs of both the House and the Senate, but the world’s second largest tech company likely won’t enjoy the same deference from the FTC.
Unlike members of congress, the FTC’s leadership is less interested in scoring political points and is better understood as “true believers” when it comes to expanding the scope of antitrust law. FTC Chair Lina Khan rose to prominence by writing a law review article questioning the efficacy of current antitrust enforcement. She is a well-established advocate of moving away from the consumer welfare standard and introducing broader societal and economic goals into the regulation of large firms.
The $68.7 billion Microsoft deal, the highest price a U.S. tech company has ever paid for an acquisition, dwarfs Facebook’s acquisitions of WhatsApp for $19 billion in 2014 and of Instagram for $1 billion in 2012. The FTC is currently challenging both of those purchases, retroactively, in court. The size of the proposed Microsoft purchase, combined with ideological enthusiasm for expanded antitrust enforcement at the agency, make it almost inevitable that the merger will face harsh scrutiny by regulators.
It would be a shame to see consumers denied the potential benefits of this merger by regulators with a pet cause.
A firm’s decision to acquire another firm is strategic, often nuanced and sometimes critical to maximizing innovation. Attempts to thwart voluntary business arrangements, like mergers, reveal an intellectual arrogance on the part of regulators. Bureaucrats and lawyers at the FTC do not possess magical abilities to anticipate all possible consequences or see every potential advantage. Nor are they blessed with absolute objectivity.
The “fatal conceit” is a delusion. And it’s certainly no way to do business.