In recent years, President Biden's antitrust officials have embarked on a mission to curb acquisitions by tech giants and other large corporations. However, their efforts have yielded mixed results. A significant development emerged as Microsoft successfully concluded its $69 billion acquisition of Activision Blizzard, signaling that Big Tech still has room for growth.
University of Michigan law professor Daniel Crane noted, “Big Tech companies will certainly be reading the tea leaves,” suggesting that now might be an opportune time for mergers.
This acquisition was the latest in a series of deals that moved forward despite Federal Trade Commission (FTC) and Justice Department objections. These agencies attempted to block at least 10 other mergers over the past two years, pledging to challenge antitrust rules that had long safeguarded tech giants like Microsoft, Google, and Amazon.
The FTC raised concerns over Microsoft's Activision deal, categorizing it as a "vertical" merger. Such mergers typically do not result in monopolies, making them less likely targets for regulatory intervention.
However, the tech industry has witnessed a surge in vertical partnerships, with Meta, Apple, and Amazon diversifying into new sectors to fortify their empires. Notable examples include Amazon's acquisition of Whole Foods and Meta's purchases of Instagram and WhatsApp.
This trend reinforces the notion that vertical deals are not inherently anticompetitive, potentially reshaping future regulatory approaches. Former FTC head William Kovacic emphasized the presumption that vertical integration can be beneficial.
Despite the objections, courts have often dismissed the agencies' arguments due to insufficient evidence, hindering their efforts to set legal precedents. For instance, a judge rejected the DOJ's attempt to halt UnitedHealth Group's acquisition of Change Healthcare in 2022.
Last year, the FTC, under Lina Khan's leadership, contested Microsoft's bid for Activision. The agency argued that, despite lacking direct competition, withholding Activision's titles could stifle consumers and competition. Microsoft countered by committing to porting Activision's Call of Duty franchise to other consoles for a decade.
Ultimately, a federal judge ruled in July that the FTC failed to demonstrate Microsoft's intention to stifle competition. This decision underscored the significance of providing concrete evidence in antitrust cases.
Antitrust experts are divided on the impact of vertical mergers. While some believe they promote competition, others argue they hinder it. MIT professor Nancy Rose advised authorities to challenge such mergers selectively, focusing on cases with substantial evidence.
Lina Khan and Jonathan Kanter, heads of the FTC and DOJ's antitrust divisions, respectively, are prepared to take risks in court to advance antitrust regulations. They aim to encourage Congress to amend existing laws. Kanter pointed out that the agencies' objections have deterred problematic deals from materializing in the first place.
In this climate, antitrust lawyers suggest that large corporations must be willing to litigate to secure deals, highlighting the increasing cost of regulatory compliance for industry leaders.