U.S. Antitrust Kneecaps Companies Trying to Compete Globally
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Throughout its 100-year-plus history, U.S. antitrust policy has studiously ignored the issue of global economic competitiveness. Indeed, in their zeal to maintain competitive balance between players in America’s domestic markets, U.S. antitrust enforcers have often harmed U.S. companies while helping their foreign counterparts. This has diminished U.S. international competitiveness, especially in advanced industries. The latest example is the Justice Department’s possible intervention to block Microsoft from acquiring video game maker Activision, a move that would benefit the Japanese company Sony at the expense of U.S. competitiveness.

The litany of such errors is long. In the 1950s, Justice ordered RCA, a once-dominant consumer electronics corporation, to license its technology to competitors, particularly Japanese companies. A few years later, the Federal Trade Commission (FTC) ordered Xerox to hand over its patents and technology to rivals, mostly Japanese companies, which soon dominated the U.S market. More recently, the FTC made semiconductor manufacturer NXP relinquish itself as a condition of purchasing Freescale Semiconductor Ltd. The disposed assets were later purchased by China’s Jianguang Asset Management Co. Ltd. Similarly, to allay its domestic antitrust concerns, the FTC demanded that Qualcomm license its technology to the Chinese behemoth Huawei.

Finally, just as Sony benefited from antitrust enforcers in the past, Sony could also benefit from them today. As part of an antitrust consent deal in 1956, AT&T’s Bell Labs was pressured to license their transistor technology to a wide array of firms—some domestic, some foreign. For example, Texas Instruments (TI) founder Jack Kilby attended Bell Labs’ workshops, as did a small team of engineers in Tokyo who would eventually develop Sony, which dominated the consumer electronics sector for decades owing to the success of its transistor radios. If the transistor was the spark that ignited the information era, then Bell Labs’ workshops provided the fuel that propelled it into ubiquity—and under pressure from the US government, Bell Labs licensed the technology to anybody for a pittance. Because of foreign exchange restrictions at the time in Japan, Sony would not have been able to afford the rights to the technology if AT&T had been able to charge the market price.

To make matters worse, the Japanese Ministry of Economic Affairs in 1964 allowed Texas Instruments to do business in Japan only on the condition that Sony becomes an equity partner to TI’s envisaged venture, that TI’s fundamental semiconductor patents be granted to Japanese companies, and that TI’s market share in Japan never exceeds 10 percent. The U.S. government sat back and watched.

In the matter at hand, Sony is cheering on the Justice Department in an attempt to block Microsoft’s acquisition of Activision. Why? The proposed merger is a bid to offer a robust platform with high-quality games and provide resources for creators to produce more gaming innovation. That’s great for gamers, but threatening to Japanese industry titans Sony and Nintendo, because it would also create a company capable of competing with them more effectively.

If antitrust officials block the merger, they would be giving Sony and its 70 percent share of the global gaming console market the upper hand while preventing Microsoft and its 30 percent market share from effectively challenging the incumbent. That would be a complete reversal of competition policy.

The Japanese gaming industry dominates the world—and yet, U.S. antitrust officials may very well further cement this already decades-long dominance by blocking the Activision-Microsoft merger. Wielding antitrust to impose a twisted conception of domestic competition at the expense of global competitiveness must end, and the proposed Activision-Microsoft combination exemplifies why.

It’s time for antitrust to emphasize competitiveness.

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