The FTC Doesn’t Understand Its Role in Antitrust (Premium)

I've already made the case for why the U.S Federal Trade Commission (FTC) is wrong about Microsoft's Activision Blizzard acquisition, as has Microsoft, but now the agency has made the case by itself. Worse, it has proven that it doesn't even understand the role it plays in enforcing this nation's antitrust laws.

As I'm sure you know, the FTC and Microsoft will square off in court over several days of hearings that start tomorrow, June 22. And perhaps not surprisingly, the two sides have filed various legal briefs supporting their arguments.

The FTC's filing is pointlessly inflammatory, noting that Microsoft's previous acquisition of ZeniMax is "powerful evidence" that it should not be allowed to similarly acquire Activision Blizzard because Microsoft made some ZeniMax titles, like Redfall and Starfield, exclusive to its own platforms. This, the argument goes is, if not proof of Microsoft's intentions with Activision Blizzard, is at the very least concerning. And "concerning" is all the FTC cares about, as it states that it only needs to "present sufficient to raise serious, substantial, difficult questions regarding the anticompetitive effects of Microsoft's acquisition of Activision."

That's cute, but that's not really the bar, now, is it? The FTC's role is more broadly about enforcing this country's antitrust laws. But Margrethe Vestager, the EU's Competition Commissioner, does understand the role that regulatory agencies play when it comes to enforcing antitrust laws. And after her agency, the European Commission (EC), approved Microsoft's acquisition of Activision Blizzard, she provided an excellent commentary on why her approach differed from that of the UK Competition and Markets Authority (CMA), which aligned with the FTC and blocked the acquisition (for equally nonsensical reasons). This is a master class in competence.

"Some people think that agencies should either block or clear mergers," she said in a recent speech. Nothing in between. So if you block you are a 'tough' enforcer. If you clear, well, let's just say you are not perceived as tough. That is not our policy. The European Courts have held that we cannot, as a matter of principle, dismiss remedy proposals. We have to investigate the merits of every solution offered. Of course we prefer structural remedies. And in fact, looking at the past 5 years, 80 percent of our conditional clearances relied on structural remedies."

"But ... in certain situations, we can accept solutions other than divestitures. Generally speaking, those solutions consist in granting access to a technology or an asset," she continues. "The criteria for doing so are stringent ... framing enforcement in a binary decision (to clear or to block) is limitative. There will be cases where competition issues cannot really be solved by a divestment, and the market will not necessarily be better off if we block the merger."

More specifically in this case, she says, "We believe the Microsoft/Ac...