Since her appointment to the Federal Trade Commission (FTC), Lina Khan has used her position as chair to wage war on America’s most successful businesses. Khan’s targets have included everyone from McDonald’s (for broken ice cream machines–really) to tech companies to the aero defense industry, which were all allegedly “too big” to meet her arbitrary standards. Most recently, Khan has set her sights on Microsoft’s acquisition of Activision Blizzard, Inc., the gaming company that produces Call of Duty.
Microsoft–an American company–manufactures the popular gaming console Xbox. Buying Activision would bring a host of new game offerings to existing Xbox users, allow subscribers to use multiple devices with a single fee, and support the creators at Activision with a broader consumer base.
Yet as 2022 ended, the FTC filed a lawsuit to block the $68.7 billion deal. According to the FTC’s website, the acquisition “would enable Microsoft to suppress competitors to its Xbox gaming consoles and its rapidly growing subscription content and cloud-gaming business.”
That should leave one to wonder: Who is this competition allegedly about to be crushed by a merged Microsoft/Activision?
As it turns out, the competition that Lina Khan seeks to protect is the Japanese company Sony, whose PlayStation gaming system currently makes up about 70 percent of the global console market.
Sony’s PlayStation has dominated the electronic gaming market for years. Upon hearing it may be subject to stronger American competition through Microsoft’s potential merger, it immediately cried foul. “Microsoft might release a PlayStation version of Call of Duty where bugs and errors emerge only on the game’s final level or after later updates,” read a corporate memo after the announcement. Sony even insinuated Microsoft would pull Call of Duty (COD) from the PlayStation platform completely.
These “concerns” were apparently sufficient to persuade Khan to attack a U.S. company – even at the expense of solidifying the already dominant market share of a Japanese one. But the allegations couldn’t be further from the truth. Microsoft has been ready “since day one, to enter an agreement with Sony to ensure that [Call of Duty] remains on PlayStation” and has offered multiple solutions to “guarantee parity between the PlayStation and Xbox platforms in respect of [Call of Duty].”
Furthermore, Microsoft has admitted that taking COD Xbox-only would be unsustainable. “The reality is that the strategy of retaining Activision Blizzard’s games by not distributing them in rival console shops would simply not be profitable for Microsoft.”
Even if Microsoft did plan to take the blockbuster game exclusive, that would hardly justify the government stepping in to block a merger that would help an American company compete with foreign rivals–especially when the governments of those foreign rivals are already weaponizing their trade authorities against our companies.
As Sen. Steve Daines (R-Mont.) noted in a hearing recently, “In Japan, they’ll take antitrust action against American tech companies, but then they’ll support policies that crowd out competition for the United States despite commitments that have been made in the Japan Digital Trade agreement. We see this in the gaming markets, where Japan appears to ignore some of these anti-competitive actions from Japanese companies, which suppress some of our major U.S. providers. I think this is a violation of its digital trade commitments, yet we haven’t seen action from the USTR”.
Is this perhaps the influence of Sony’s lobbyists trying to block America’s access to the Japanese market while simultaneously tying our hands here at home?
Sony’s duplicitous advocacy is even more striking when considering how their company has received significant revenues from carrying games exclusively, which they now (falsely) accuse others of attempting to do. Unfortunately, Biden’s FTC is now lasering in on the American company, taking the same side as Japan’s trade representatives.
The Biden administration says it supports economic growth but is doing everything it can to make America less competitive.
