When President Biden took office, he sent several signals that he was ready to deal with increasing corporate concentration. One of the clearest was the appointment of consumer advocate Lina Khan – a prominent critic of monopoly power – to lead the Federal Trade Commission.
Instead, the acquisitions have continued under Biden’s oversight. Last week, the latest evidence emerged that cutting corporate concentration will be more difficult than Biden had hoped: US courts rejected the FTC’s attempts to stop Microsoft from absorbing video game company Activision Blizzard. Microsoft could finalize the deal in the coming months; an important deadline was extended this week.
The merger would be by far the largest ever in video games, when adjusted for inflation. The gaming industry now accounts for a significant portion of the economy. It’s bigger than music, American book publishing and North American sports combined. The gaming division of Microsoft and Activision Blizzard make more money every year than all American movie theaters. The two companies are among the largest in games, as this chart from my colleague Ashley Wu shows:
The FTC said the merger between Microsoft and Activision was anti-competitive and sued to stop it. The agency argued that the merger would give Microsoft, maker of the Xbox game console, an undue advantage over rival Sony, maker of PlayStation. Of particular note was Activision’s massive franchise, Call of Duty. A new edition of Call of Duty is consistently one of the best-selling games on Xbox and PlayStation every year. But if Microsoft owns Call of Duty, it could make the game an Xbox exclusive and rob Sony of one of gaming’s biggest attractions.
To address those concerns, Microsoft promised it would put Call of Duty games on PlayStations for another 10 years. That was one of the reasons the courts ruled against the FTC: They found the agency had failed to demonstrate that the deal was likely to harm competition.
With their ruling, the courts allow another major merger that will further consolidate an important industry. Many experts say the trend ultimately hurts consumers by reducing the kind of competition that lowers prices and improves the quality of goods and services, even if the FTC couldn’t prove all of that in this case.
Concentrated power
Let’s zoom out. In recent decades, markets have become more concentrated. The very largest companies dominate most industries, as this chart shows:
Why is this important? Simply put, a lack of competition allows companies to lower wages, raise prices and reduce the quality of their products. A classic example is Internet service: many Americans live in places with only one or two providers. These companies keep prices high, the internet can be spotty, and customer service is often poor. Since customers have no alternatives, providers can get away with those mistakes.
Business concentration deepens those kinds of problems, experts say. An economist concluded that market concentration costs the average American household more than $5,000 a year. Progressives like Khan have argued that regulators need to take the issue more seriously.
Courts are pushing back
The Biden administration this week released guidelines aimed at tightening antitrust laws that restrict anti-competitive practices. Under Khan, the FTC has also urged courts to effectively lower the burden of proof needed to show that a merger is anti-competitive. Some experts say this approach has its merits: US courts have set very high standards in recent decades, exceeding standards in the UK and much of Europe.
“We can convict and send someone to prison for murder based on circumstantial evidence,” said Douglas Melamed, an antitrust expert at Stanford Law School. “But it often seems that courts won’t let plaintiffs win an antitrust case based on circumstantial evidence.”
The FTC has yet to convince the courts to relax their standards. The loss of the office in the Microsoft-Activision case is the most recent example. It also failed to block Meta’s acquisition of a virtual reality company, Within. And it even lost in its own administrative court, which ruled in favor of the gene sequencing company Illumina in acquiring the Grail company.
Khan’s case still has potential. The last major shift in antitrust law, in the 1970s, came after decades of work by conservatives to push the law and courts in their direction. The movement that Khan helped popularize among progressives is only a few years old. If it convinces more of the public and, more importantly, judges, it could eventually succeed.
Related: The FTC’s defeats have raised new questions about Khan’s strategy. “All these losses in court make their threats more like a paper tiger,” said one CEO.
International
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Opinions
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MORNING READS
Where we are: Young Arab Americans find community in a hookah lounge in Dearborn, Michigan.
“Am I training my replacement?”: Call center workers face the threat of AI to their jobs.
Modern Love: A father lost his memory but gained recognition for his child’s sex.
lives lived: After being kicked out of the U.S. Army in 1963 for being a lesbian, Lilli Vincenz became an early crusader for gay rights in a time before the Stonewall riots. She died at the age of 85.
WOMEN’S WORLD CUP
The older players once relied on MapQuest printing. A young person has never used a CD player. The US team has a generation gap to bridge as it opens tournament play tonight against Vietnam.
The Vietnamese women will represent a football-obsessed country at its first World Cup.
The US will take home more money than any team, no matter how it ends, because of its employment contract with the American Football Federation.
After losing star player Sam Kerr to injury, Australia beat Ireland 1–0. Canada, a top contender, battled Nigeria to a scoreless tie. And Spain defeated Costa Rica 3-0.
OTHER SPORTS NEWS
Alternating Hands: NFL team owners approved the sale of the Washington Commanders and fined the outgoing owner, Daniel Snyder, $60 million after an investigation revealed he had assaulted a former cheerleader. It was the largest penalty ever imposed on an NFL team owner.
NFL Coach Comes Out: Kevin Maxen, an associate coach for the Jacksonville Jaguars, is believed to be the first openly gay male coach in major American professional men’s sports.
ART AND IDEAS
Translating between cultures: Japanese comic books, also known as manga, are popular in the US. But translating them for a Western audience is difficult, write Gabriel Gianordoli and Robert Ito. In Japan, the books are meant to be read from right to left. And pages are often filled with sounds – there are thousands of onomatopoeic words in Japanese, far more than the usual “pow!” of American comics.
More about culture
Fans say John Mayer’s facial expressions when he plays guitar are almost as passionate as his music.
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