Much has been made of Federal Trade Commission (FTC) Chair Lina Khan’s willingness to import a European regulatory agenda to the U.S. It is no small secret that today’s FTC admires the tough antitrust stances European regulators take towards big businesses – especially those in the technology sector. However, with Microsoft’s recent acquisition of gaming studio Activision Blizzard, Khan and the FTC seem poised to stand alone in the fight against this transaction.
The companies closed the $69 billion deal a few weeks ago. The FTC initiated its push to stop the deal from going through late last year, and the agency is vowing to continue to move forward with their complaint despite the acquisition. Setting aside the flimsy foundation on which the FTC’s complaint rests, success on the FTC’s part here would be economically disastrous — there’s a reason FTC remains on a regulatory island for this crusade.
Given how long the complaint process normally takes for proceedings like these, the FTC may not get full resolution of its case against Microsoft until the middle of 2024. At that point, Activision will be far more integrated with Microsoft’s products and services than it is right now. Were the FTC to emerge victorious, the companies would have to undergo the expensive process of unwinding their merger – throwing millions – if not billions – of dollars down the drain with no economic benefit or improved consumer experience.
The looming FTC complaint process is the final hurdle for the companies to clear. The European Commission – the executive arm of the European Union – approved the acquisition in May. Regulators in the UK did the same shortly before the closure of the deal. However, the FTC remains resolute in ensuring the U.S. is the highest regulatory denominator when it comes to the gaming sector.
This marks a noted shift from the usual global regulatory flow. European regulators are often far more willing to hamstring American tech companies than domestic regulators. This is because of a decidedly more heavy-handed impulse on the part of the Europeans, and due to the legal protections that American companies have to protect them against regulatory harassment. It is why the FTC has compiled a long list of court losses over the last year in similar efforts.
Because of this, Chair Khan has met with European regulators in what many have described as an attempt to outsource her regulatory agenda to friendlier jurisdictions where success is more likely. However, the Microsoft acquisition of Activision Blizzard sees American regulators as the last obstacle standing.
One can only hope that this will be a clear sign that Khan and the FTC have truly “jumped the shark” when it comes to antitrust. The reason America should resist the urge to become more like Europe – or, in this case, more stringent than Europe – when it comes to tech regulation, is because Europe has practically no tech sector of which to speak. They have thoroughly regulated tech innovation off the continent.
The reason the U.S. has most of the world’s big tech companies is because light-touch regulation has allowed entrepreneurs to innovate, thrive, and grow. This environment has also allowed tech companies to make strategic acquisitions to revolutionize their offerings and better compete as the market develops and demand changes. Other than satisfying a newfound affinity for populism amongst some talking heads, there is little upside to pursuing the European approach.
Americans can only hope this is a clarifying moment for how far the FTC has gone. The other option is that the agency intends to continue attempting to outdo its European counterparts and a new era of restriction and uncertainty for American businesses is on the horizon. As the world approaches new and exciting opportunities in the realm of artificial intelligence and virtual reality, this would be a mistake.
No one knows what vital innovations are just on the horizon. Products and services that are indispensable today were once thought to be unthinkable just a few years ago. Regulatory strong-arming of the kind the FTC is pursuing would choke these ideas out before they see the light of day. Even if the efforts end fruitlessly in a courtroom, the threat of millions in legal costs will surely be enough to deter many from even trying, knowing it may not be worth the effort.
This is a moment to see just how unhinged the new aggressive school of antitrust (which just harkens back to a failed approach over a century old) has become. America ought not become more restrictive than a continent that has willfully destroyed its own tech sector.