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Lina Khan has had a rough few days. The Federal Trade Commission chair suffered a setback in her ambitions to beef up antitrust enforcement for the Big Tech era when a California judge rejected her attempt to halt Microsoft’s $75bn purchase of Activision Blizzard, a video game maker. On Thursday, Khan endured a four-hour grilling at an often hostile Congressional hearing. The FTC appealed against the California judge’s decision, but was rebuffed. The losses are a sign that Khan’s team, however well-intentioned, has over-reached.
Khan, along with Jonathan Kanter at the Department of Justice, came into office determined to establish new principles to shake up decades of antitrust thinking. One is that the conventional test of harm to consumers from excessive market power — rising prices — is outdated. The second is that vertical mergers, or consolidation between companies with a supplier-customer relationship, can merit tougher antitrust action, not just “horizontal” mergers between rivals in one sector. Third, regulators should attempt to spot incipient monopolies as they emerge, rather than tackle them only after they have formed.
The arguments, particularly the first, have merit, and efforts to get ahead of the regulatory curve on tech are worthwhile. But the Khan team’s crusading zeal has moved too fast, given that this is untested ground. With no congressional majority to enact her ideas into law, moreover, she was always likely to have to rely in part on creatively reinterpreting existing law and fighting cases in court.
The Microsoft-Activision deal was an important test incorporating elements of the new thinking. But Judge Jacqueline Scott Corley denied an injunction to stop the deal completing, rejecting the FTC’s assertion that the combined business would pull the popular Call of Duty game from Sony’s rival PlayStation platform. Microsoft, she noted, had made commitments to share Activision’s content. On Sunday Microsoft Gaming’s chief executive said the company had signed an agreement to keep Call of Duty on PlayStation following the acquisition. The judge said the FTC had also failed to show the combination would substantially lessen competition in the embryonic market for cloud gaming. The EU had already cleared the deal. The UK’s Competition and Markets Authority, which had blocked it, rowed back after the California decision.
The FTC may yet press ahead with efforts to scupper the deal in its own administrative court, but that will be much harder if the deal has already closed. And as one lawmaker noted last week, the latest loss meant Khan was now “0 for 4 in merger trials”.
Khan made clear last year she was prepared to push the legal envelope, noting: “You lose all the shots you don’t take”. But shots that fail to hit the mark can prejudice shots that might be taken later. Repeated losses risk undermining the credibility of the regulator and its thinking. And the conservative majority on the Supreme Court makes this an especially tricky environment in which to persuade lower court judges to back novel legal theories.
Khan’s FTC should be more selective in the cases it fights, focusing on those where it has the most powerful evidence. It could then focus its best efforts on winning key cases, or at least bringing compelling arguments. That is especially true with two potential landmark cases looming — against Meta over its 2012 takeover of Instagram, and a suit Khan is said to be readying over Amazon’s online marketplace.
There is still scope for Khan’s FTC to make a mark through rulemaking, such as its proposal to ban employers from imposing non-compete agreements on workers. Together with the DoJ, it is preparing to unveil new merger guidelines — and its probe into the data privacy risks of OpenAI’s ChatGPT chatbot is an innovative step. But when it comes to modernising antitrust, evolution may succeed better than revolution.