Bloomberg reports that a California judge has ruled against the federal Trade Commission (FTC), saying that a $69 billion acquisition by Microsoft of Activision Blizzard can go forward. The FTC did not adequately show that the merger of the two companies would harm competition within the gaming industry.
It is not yet a done deal, however. The FTC says it is considering its options, which could include an appeal of the ruling, or it could "move forward with an in-house proceeding over the deal after it is consummated." Plus, "the UK Competition and Markets Authority, which had vetoed the deal in May, said it’s prepared to evaluate proposals from Microsoft and has agreed to a stay in the companies’ appeal before the Competition Appeal Tribunal."
If the deal goes through, it will make Microsoft number three globally in the gaming business, behind China’s Tencent Holdings Ltd. and Sony Corp.
- KC's View:
I bring this up because the FTC also is evaluating the proposed $24.6 billion purchase of Albertsons by Kroger, as well as pursuing a series of moves against Amazon and considering a broader antitrust suit against the company.
In The Information, analyst Martin Peers offers the following assessment:
Lina Khan needs to work on her aim. A judge’s ruling today against the Federal Trade Commission’s request to block Microsoft’s purchase of Activision was so definitive that it has to hurt the regulator’s credibility, at least when it comes to tech cases. Coming immediately after a similar defeat involving Meta Platforms, the ruling suggests that by going after all tech, all the time, Khan is overreaching and risks achieving nothing. The taxpayers whose money she is spending have a right to a more refined approach.
And, Peers goes on:
There’s no question that some big tech companies exert too much power in ways that deserve scrutiny from regulators. The case the Justice Department filed against Google, particularly over its control of the open-web ad market, is an example. But just because a company is big doesn’t mean the government should automatically try to stop it from expanding further. If there is an issue with acquisitions such as Activision, it’s whether they make sense from a business point of view, but that’s something for shareholders to assess over time. The FTC hasn’t yet said whether it will continue to fight the Activision deal, but for everyone’s sake, Khan should let this one go—and maybe think more carefully about what fights she takes on in the future.
It isn't just tech companies that the FTC is investigating, of course, and it will be interesting to see whether the agency recalibrates its approach in view of rulings like this one.
The line is an interesting one: Just because a company is big doesn’t mean the government should automatically try to stop it from expanding further. And we know that Kroger and Albertsons will argue that they need to expand in order to compete with the likes of Walmart, while Amazon will say that it hasn't done anything wrong but rather is just better at doing what everybody else does.
I continue to believe that the FTC will try to block the Kroger-Albertsons deal, but that the two companies will ultimately prevail in the courts, though they'll have to divest a higher number of stores than originally proposed.
But who knows? The situation seems fluid, and all depends on how you define "competition."