Microsoft’s acquisition of Activision-Blizzard, which would be the biggest such deal in the history of video games, is now all but finalized. That’s despite the US Federal Trade Commission attempting to put the brakes on the nearly $70 billion purchase, if not stop it entirely: The FTC’s attempt to block the execution of the deal was denied by an appeals court last week. But regulators aren’t taking the loss lying down. A new joint effort of the FTC and Department of Justice, the biggest hurdles for mega-mergers, is set to make them harder to accomplish.
In a 51-page draft document (PDF link), the FTC and DOJ lay out proposed new guidelines covering the legality of mergers between mega-corps. Both agencies regulate interstate commerce in the United States and have legal authority to block company mergers and acquisitions. Reasons for doing so are varied, but the most often employed is the threat to competition — such was the case in the last major tech merger to be blocked, AT&T’s thwarted purchase of T-Mobile in 2011. But that was an outlier case; American regulators have generally been seen as friendly, even forgiving, to technology companies seeking to combine their economic powers, even when the executive branch is under nominally progressive control.
The new document is outlining a more strict approach to regulation for mergers. Thirteen broad guidelines cover a wide variety of situations in which the FTC and DOJ might intervene via direct regulatory action or the courts. Some cover areas the agencies have already claimed historically, like number two, “Mergers Should Not Eliminate Substantial Competition between Firms.” Others apparently expand the regulators’ scope, claiming authority under the Sherman Antitrust Act and Clayton Antitrust Act of 1890 and 1914, respectively.
Take guideline number five, for example: “Mergers Should Not Substantially Lessen Competition by Creating a Firm That Controls Products or Services That Its Rivals May Use to Compete.” Google’s nominal control of the online search and advertising markets, or Apple’s exclusive control of apps available on the iPad and iPhone, could both fall under this provision. Number seven, “Mergers Should Not Entrench or Extend a Dominant Position,” could apply to both.” Number nine, “When a Merger is Part of a Series of Multiple Acquisitions, the Agencies May Examine the Whole Series,” could have applied to Microsoft’s Activision ambitions…at least if it was active a year or so ago. Microsoft has spent the better part of the last decade acquiring developers big and small to shore up its first-party publishing in an attempt to counter Sony’s highly successful PlayStation exclusives.
In a statement on the updated guidelines, US Attorney General Merrick Garland said, “Unchecked consolidation threatens the free and fair markets upon which our economy is based. These updated Merger Guidelines respond to modern market realities and will enable the Justice Department to transparently and effectively protect the American people from the damage that anticompetitive mergers cause.”
The US federal government is currently under left-leaning Democratic control, with President Biden overseeing an incredibly thin majority in the Senate, while Republicans control the House of Representatives and the judiciary with a 6-3 majority on the Supreme Court. That makes the court system the go-to backup plan for any large tech company that wants to get even larger. That said, the courts aren’t necessarily an instant win for corporations, even in the traditionally business-friendly United States. Fights over whether or not a particular merger violates regulatory guidelines, and whether those guidelines are actually in line with laws written by Congress over a century ago, can stretch across months and years of court cases and appeals. Larger mergers also face international hurdles, notably the European Commission, which is seen as particularly wary towards the tech industry.
The DOJ and FTC’s redoubled efforts to fight consolidation in the technology market and other large sectors of the economy will undoubtedly face pushback from both corporations and the legislators that support them. How successful those efforts will be will inevitably come down to court battles and justices’ interpretation of the law. And of course, the guidelines themselves aren’t set in stone: The current FTC has already revised guidelines put in place during the previous Trump administration. If Republicans gain control of the executive branch after the 2024 federal elections, it’s likely that much of the new guidelines proposed today will be discarded in the same way.
