Until recently, antitrust regulators in Europe and the United States took different approaches. Now, they’re on the same page — which some experts say makes closing deals harder.
When Microsoft announced its $70 billion acquisition of the video game maker Activision Blizzard last year, almost everyone involved expected antitrust inquiries from officials in the European Union and Britain, and many thought regulators there would try to block the deal. What U.S. enforcers would do, however, was less clear.
By December, it had become apparent that all three regulators would scrutinize the deal — and that they were playing off one another’s plans.
The tell? The Federal Trade Commission chose to sue Microsoft in its own administrative court rather than first moving to block the deal in a federal court. Typically, the agency would seek a temporary injunction from a federal judge to stop a transaction from going through before trial; in this case, the European Union’s antitrust authority had already announced it was reviewing the deal. And the F.T.C. knew Europe’s inquiry meant the deal was at least many months away from closing, so it went straight to its own, more favorable court.
Welcome to the modern era of global antitrust enforcement — an elaborate labyrinth of regulatory bodies working together.
Cooperation among antitrust regulators isn’t new, and U.S. regulators have long discussed timing on cases, arguments, objections and potential remedies with their foreign counterparts. The shift now is that what are perhaps the three most important regulators worldwide — the F.T.C., the European Commission, and Britain’s Competition and Markets Authority — are roughly on the same page. All of them want to be seen as tough on deals.
Microsoft’s Activision deal is the biggest test yet of this new alignment between global antitrust enforcers, which some lawyers say is making it tougher for big corporations to close deals.
Officials in more than a dozen countries are reviewing Microsoft’s Activision deal, which would vault Microsoft to the top of the $175 billion gaming industry. Some fear that if Microsoft owns Activision, it could make some of the world’s most popular games, like “Call of Duty,” exclusive to its Xbox consoles.
Microsoft has said that it is not interested in this strategy, and that it is acquiring Activision to gain a foothold in mobile gaming and virtual reality. In filings and statements, the company has pledged to keep licensing of Activision games open to its competitors including Sony and Nintendo.
In the past, so-called behavioral remedies, in which companies pledge to refrain from certain activities that could hurt competition, had been accepted by antitrust enforcers, such was the case in the 2010 merger of Live Nation and Ticketmaster. But today, it’s harder for companies to make these sorts of compromises.
Until recently, the European Commission was often seen as the toughest antitrust regulator, taking a more expansive view of what could harm competition. On the other end of the spectrum was the United States, where decades of precedent leaned toward a more limited view of the kinds of deals that should be blocked. And so deal makers believed that if they could appease the European Union with a behavioral remedy, their transaction was likely to survive global scrutiny.
That has changed. Britain’s Competition and Markets Authority, which was established in 2014, has positioned itself as pushing for tougher powers after Brexit, presenting itself as a check on Big Tech and other corporate giants. In the United States, President Biden has appointed antitrust officials — Lina Khan of the F.T.C. and Jonathan Kanter of the Justice Department’s antitrust division — who have expansive takes on regulating competition. Khan, in particular, has championed cracking down on mergers and Big Tech, and she has said she is willing to take on tough-to-win cases to help stretch the boundaries of antitrust law.
Cracking down on consolidation, especially in Big Tech, is politically popular on both the right and left, and antitrust cases are getting more attention from the public.
One former enforcement official, who asked not to be named because his employer had not authorized him to comment, put it this way to DealBook: Regulators would rather fight to block a deal and lose than accept a compromise, because the political cost of agreement is too steep.
Alignment across The Atlantic
The F.T.C. opposed Microsoft’s bid to acquire Activision in a lawsuit filed in December. Microsoft’s legal team also expects the antitrust authority in Britain to oppose the transaction, while it believes the European Commission is open to potential remedies, according to four people briefed on the matter who were not authorized to speak publicly.
Some of these people said that Microsoft was hoping to convince both Britain and the European Union to accept its concessions and approve the deal, which could make it easier for the company to reach an agreement with the F.T.C. before the scheduled administrative trial starts in the summer. If all of the agencies accept the compromise, the (perhaps wishful) thinking goes, none of them will look weak on Big Tech.
That logic also works in reverse: Any of the three agencies could instead put pressure on the others to oppose the acquisition.
Still, the closer philosophical alignment of American, British and European merger enforcers has its limits, as a major blow to the F.T.C. this week made clear. A federal judge rejected the agency’s bid to block a deal by Meta, Facebook’s parent company, to buy a virtual reality fitness start-up. That case was built upon a little-tested legal theory that the deal would hurt future competition in an untested market — similar to the F.T.C.’s argument that Microsoft’s purchase of Activision would be a threat to the still-nascent market for cloud-based gaming.
Ms. Khan herself has suggested that even if these types of cases fail, they can still push the boundaries of antitrust enforcement. For example, in the decision on Meta’s bid to buy Within, which was unsealed on Friday evening, the judge found merit in the legal theory even while deciding the facts in the particular case were unconvincing.
“The new heads are trying to understand new harms,” said Eleanor Fox, a professor at N.Y.U. law school who is an expert in competition policy. “They’re moving into new territory.”
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