The federal government is cranking up the heat on Big Tech as the Federal Trade Commission takes on two major antitrust cases. The commission just voted 3-1 to sue Microsoft to block its $69 billion acquisition of Call of Duty maker Activision Blizzard. At the same time, it’s in court against Meta, Facebook’s parent company, to block the company from acquiring fitness virtual reality startup Within for $400 million.
Many are casting doubts that the FTC has the facts on its side to win one or both of these cases against these tech giants. Among the skeptics is Douglas Melamed, dubbed the Michael Jordan of antitrust law. Melamed is a former acting assistant attorney general in charge of the Antitrust Division at the Department of Justice. He was principal deputy assistant attorney general when the DOJ successfully sued Microsoft over antitrust violations in the 1990s.
Melamed, who is now a professor at Stanford Law School, said FTC Chair Lina Khan is willing to lose cases to demonstrate to Congress that the country needs new antitrust legislation.
“I think that’s kind of nutty,” Melamed said. “I think if you lose cases, the most likely inference Congress is going to draw is either you brought bad cases or you don’t know how to litigate them.”
In challenging Meta’s acquisition of Within, the FTC is arguing a potential competition theory. The basis is that if these two companies don’t merge, Meta will enter the fitness virtual reality space on its own and then compete against Within.
Melamed said the FTC is arguing for a lower standard on this conventional theory by only saying it is reasonably probable that Meta would have entered the fitness VR space, not that Meta was more likely than not to enter.
“And they don’t seem to be relying on the kind of economic analysis that traditionally had been the basis of antitrust cases in the past 40 years,” he added. “They rely more on anecdotal and impressionistic stories. And that’s where I think they’re going to have trouble because they’re not going to have, probably, the kind of evidence courts look for so it is a long shot. But if they win, that would be something new.”
As has been reported before, FTC staff did not want to pursue the case against Meta but Khan reportedly overruled them. That said, Melamed thinks Microsoft’s case might be an even tougher challenge for the FTC than the one with Meta and Within. He said based on the complaint, the agency seems to lack rigorous economic analysis to back up its claims against the tech giant.
The FTC said it is concerned Microsoft will suppress competition by limiting Activision Blizzard games to Microsoft’s Xbox gaming consoles. But Microsoft claims regulators shrugged off its offer to make the profitable Call of Duty game available to competitors like Sony.
When Melamed and the DOJ brought their antitrust case against Microsoft, they accused the company of trying to monopolize the personal computer market with Windows and Internet Explorer.
“At the time, it was extremely controversial. A lot of people thought we were nuts to bring it. It turned out the facts were better even than I think we anticipated. And we won that case, we made some good new law. But at the core, it was because we were willing to run the risk of losing.
“And I think that’s a responsible thing for an aggressive enforcer to do, to a point. You don’t want to be reckless. But to do it on a political calculation that it will persuade Congress to pass legislation, I think is nutty,” Melamed said.
Khan explained her own strategy back in May at the Stigler Center antitrust conference, saying that if there’s a “law violation” and “the current law might make it difficult to reach, there’s huge benefit to still trying,” especially with bigger companies and high profile cases.
“If you don’t try, the message that sends out to the world is that the enforcers don’t think there’s a problem in the market,” she added. “Whereas if you try, even if you lose, that then creates the message for Congress.”
While there are last-ditch efforts in Congress to pass new bipartisan antitrust bills targeting Big Tech before the end of the year, the Senate has so far not put it to a vote, despite bipartisan support in the House.
“I don’t think the progressives are likely to have much of a legacy, longterm legacy in antitrust, unless they’re able to get legislation through Congress, which doesn’t seem very likely these days,” Melamed said.