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Opinion How both sides can win in the FTC’s antitrust case against Microsoft

(Dado Ruvic/Reuters)

What’s the Federal Trade Commission’s best shot at winning its lawsuit to block Microsoft from acquiring Activision Blizzard? Let Microsoft win, too.

When FTC Chairwoman Lina Khan entered office, she was expected to try to transform antitrust doctrine — challenging the courts to protect competition for competition’s sake rather than focusing only on consumer welfare. The Microsoft-Activision deal, however, lends itself to a decision based on the more traditional model that balances potential benefits to consumers against drawbacks. And if the FTC manages to extract concessions from the technology giant that enhance the good the purchase can offer to gamers while eliminating most of the bad, the episode will be an example of how the agency can fight for more robust markets in a manner that is less dramatic but just as effective.

The FTC believes that letting Microsoft snatch up the maker of some of the gaming world’s most popular titles would stymie competition not only in today’s markets but also in tomorrow’s, hurting consumers along the way. The technology giant, it alleges, could use its control over franchises such as “Call of Duty” and “Overwatch” to privilege its Xbox consoles over rivals such as Sony’s PlayStation — and its subscription and cloud-streaming services over alternate offerings. The result, says the consumer protection agency, could be higher prices for those playing on other platforms; lower quality on those platforms; or less innovation from a firm complacent in its dominant position.

Maybe. But Microsoft has compelling answers to most of these concerns. For instance, it’s possible consumers will end up paying lower prices overall for top-notch games than they pay today — certainly if they play them on Xbox, and even more certainly if they opt into a subscription model that would also give them the opportunity to play more games on a variety of devices (from consoles to personal computers to mobile phones) for less money. Indeed, if such a model manages to take off thanks to Activision’s roster, it could enhance competition in the industry rather than impede it. Sony, comfortable in today’s console-centric world, would need to step up to meet its challenger, maybe by lowering its own prices or maybe by making better games. Either outcome would be a boon to consumers.

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Another question is whether the deal would allow Microsoft to deny, delay or degrade Activision titles on rival systems. While the company points out that doing so wouldn’t make much economic sense considering the bulk of the acquisition’s value comes from the myriad customers playing “Call of Duty” and more across a variety of platforms, it said the same thing to European Union regulators about a previous acquisition — before withholding new games. But there’s an easy answer to these troubles: a legally binding consent decree that would bar Microsoft from making any Activision titles the FTC chooses exclusive to its consoles as well as its subscription and cloud-streaming services.

The FTC is right to take an active stance after years of mostly sitting by while Silicon Valley juggernauts cemented their status at the top of the food chain by consuming start-ups. The agency is also right that the future of gaming is up for grabs, especially as the metaverse begins to take shape. But the answer isn’t for the agency to become so risk-averse that it stands in the way of that future by blocking mergers with the potential to transform the industry just because they carry hazards. Rather, it is to directly confront those risks — and prevent them. By doing so in the Microsoft-Activision case, the FTC could achieve something better than merely warding off a less competitive market: It could create one that is more competitive. That doesn’t mean the chairwoman and commissioners shouldn’t at some point test their more novel theories of modern-day antitrust in court. But they should also consider that creative and vigorous antitrust action can take plenty of less flashy forms.

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