The Post has learned that the FTC is at odds over Microsoft’s $69 billion acquisition of Activision — potentially paving the way for approval of the controversial mega-merger.
At least one Democrat on the four-member panel has recently been sympathetic to the merger, according to people familiar with the matter. That, in turn, could present a difficult path for FTC Chair Lina Khan — who, according to insiders, sees the Microsoft deal as a major target as she looks to boost her credibility as the Big Tech antitrust agency.
Khan – who publicly said in June the agency was reviewing the deal’s impact on workers – is still pushing in recent weeks to sue to block the merger, which would pair Microsoft’s Xbox with popular Activision games such as “Call of Duty,” the sources said. and “candy” crushes. Late last month, Politico reported that an FTC lawsuit over the deal was “likely,” noting that agency staff were “skeptical of the company’s arguments.”
The FTC’s sole Republican commissioner, Christine Wilson, has voiced support for the deal. But at least one of the three Democratic commissioners on the four-member panel has also recently appeared to lean toward Microsoft, along with Rebecca Slaughter and Alvaro Bedoya, in addition to Khan, according to a person familiar with the matter.
An FTC insider told the Post that “some Democrats may prefer to reach a settlement” that approves the deal with the company making concessions, rather than trying to block it entirely.
While the dissenting Democrat could not be immediately identified, Washington, D.C. sources with knowledge of the situation pointed to Slaughter as acting FTC chairman last year when President Joe Biden tapped Khan, 33, to helm the powerful regulator. mechanism.
A Democratic defection would tie Khan 2-2 in any vote to stop the merger — an outcome that would not only effectively pass the deal, but would also call into question Khan’s authority at the agency. So, according to DC insiders, it’s an unlikely vote for Khan to risk.
“Lena probably won’t let it happen, so she won’t vote and file a motion to approve the settlement,” said former FTC Chairman William Kovacic. “The way out is to say, ‘We got a lot of stuff, only got it because we’ve been badass all along.’”
Microsoft has a history of courting Democrats. During the 2020 election cycle, Microsoft donated $13.8 million to Democrats and just $1.72 million to Republicans. In 2022, it will donate $4.1 million to Democrats and $1 million to Republicans, according to Open Secrets.
Senate Majority Leader Chuck Schumer reportedly traveled to Washington state in July to meet with Microsoft President Brad Smith and discuss the pending Activision merger and its potential impact on New York, among other issues. They also reportedly met in February.
Insiders pointed out that Slaughter served as Schumer’s chief legal counsel from June 2014 to May 2018 before leaving to become a commissioner of the FTC.
“That’s when Schumer called his old protégé and said, ‘What’s wrong?'” according to Kovacic.
Meanwhile, reports have surfaced in recent days that Microsoft has signaled a willingness to make significant concessions in order to close the deal. Last week, Reuters reported, citing unnamed sources, that Microsoft may offer Playstation owner Sony a 10-year licensing deal for its blockbuster “Call of Duty” franchise.
As The Washington Post reported early last month, Microsoft’s stubborn refusal to make specific concessions to regulators and competitors in exchange for winning deals has been a major sticking point. If Microsoft eventually shows a willingness to back down, it would weaken any reason the FTC had to block the merger — and encourage opponents, experts say.
“What made it difficult was when Microsoft went to their friends in blue and said, ‘We’ve got a package solution for every perceived problem, and it’d be unreasonable if the FTC folks didn’t accept it ’”” Kovacic said.
The former FTC chairman said that if Microsoft does offer a major remedy, President Biden may want the deal approved and ask his antitrust adviser Tim Wu, among others, to push Khan to accept the proposal. Given its history of responsible behavior in the past, Microsoft can be trusted to keep its promises, the source said.
“It’s hard to say right now, ‘This isn’t good enough,'” said Kovacic, who now puts the chance of the merger being approved at 70%. “It’s harder for the committee to set it aside.”
Doubts about the deal persist on Wall Street. Although Microsoft has agreed to pay Activision $95 per share in cash, Target’s shares closed Friday at $75.76.
FTC staff is expected to make recommendations on the Microsoft deal by mid-December. Microsoft could then meet with individual committees to advance its case ahead of a final vote later this month, according to sources close to the agency.
“As we have stated previously, we are prepared to address the concerns of regulators, including the FTC and Sony, to ensure the transaction closes with confidence,” a Microsoft spokesman said in a statement. Still lagging behind Sony and Tencent in terms of technology, Activision and Xbox will together benefit gamers and developers and make the industry more competitive.”
An FTC spokesman did not respond to a request for comment.
An FTC insider noted that the Communications Workers of America wrote in a June 30 letter that it supports the deal and has been lobbying Congress. The CWA said it believed the merger would provide a clear path to collective bargaining and unionization for Activision Blizzard employees. Lawmakers may be inclined to pass that message on to the FTC, the sources said.
“All the commissioners have adapted to Hill,” a DC insider told the Post.