A federal judge today rejected the Federal Trade Commission’s lawsuit to block Microsoft’s acquisition of video-game company Activision Blizzard, in another setback for progressives’ efforts to remake antitrust law.
Activision Blizzard is a major video-game company, owning titles such as Call of Duty and Candy Crush that millions of people play. Microsoft announced its plan to buy Activision Blizzard for $68.7 billion in January 2022, which would be one of the largest tech-industry mergers ever. The acquisition would be a vertical merger, as Microsoft makes the Xbox video-game console on which Activision Blizzard games can be played. It would also give Microsoft a foothold in mobile-phone games, a market in which it currently has little presence.
In her 53-page decision that carefully scours the evidence, Northern California District Court Judge Jacqueline Scott Corley rejected the FTC’s argument that Microsoft would have an incentive to pull Call of Duty from non-Xbox players. She also found no evidence that the merger would reduce innovation and wrote that the merger would increase competition in the cloud-streaming video-game market. Corley was appointed to the bench by Joe Biden, so progressives won’t be able to dismiss her opinion as politically motivated.
“The Court finds the FTC has not shown a likelihood it will prevail on its claim this particular vertical merger in this specific industry may substantially lessen competition. To the contrary, the record evidence points to more consumer access to Call of Duty and other Activision content,” Corley concluded.
As Jessica Melugin of the Competitive Enterprise Institute wrote for Capital Matters last month, the FTC’s case against Microsoft was the latest iteration of its opposition to bigness for its own sake. It represents a return to an older way of doing antitrust enforcement that economists and judges have rejected for decades.
In response to today’s ruling, Melugin said, “This decision is no surprise because of the meritless nature of the FTC’s case, but hopefully it will be a corrective rebuke to regulators. Whatever academic theories may be in vogue among unelected, appointed officials, the facts still matter in Article III courts.”
The FTC, under chairwoman Lina Khan, has sought to remake antitrust doctrine along more progressive lines, but agency morale has declined, and talented lawyers have left. Many antitrust efforts have failed to even reach the courts. As former FTC commissioner Joshua Wright told NR in March, “In the litigated cases we have, small as that number may be, we are getting losses that reject the FTC action, not on theory but on facts and evidence.” The Activision Blizzard case is the latest example.
Wright told NR today, “We’ve known for a long time that vertical mergers can harm competition if the facts match the theory. What the judge held today was that the facts did not match the FTC’s theory — which was obvious when the deal was announced, and should have been obvious to the FTC.”
“With zero competition wins in federal court to date, something is obviously awry at the Biden FTC in terms of case selection and evidence development,” Wright said.