Federal Trade Commission Chair Lina Khan is having a tough week.
A federal judge handed the US antitrust regulator a major loss on Tuesday, ruling that Microsoft Corp. can move forward with its $69 billion acquisition of Activision Blizzard Inc. It marked the second big courtroom defeat this year in a case Khan’s brought against Big Tech after a judge found against the FTC in its challenge to Meta Platforms Inc.’s acquisition of a virtual reality startup.
The setbacks have dulled the shine on the youngest-ever FTC chair, and cracks have emerged in her alliance with seemingly like-minded UK and EU regulators. The UK Competition and Markets Authority on Tuesday paused litigation over the Microsoft-Activision deal, offering the companies an unprecedented second chance to propose a fix. On Wednesday, the European Commission approved Broadcom Inc.’s $61 billion acquisition of cloud-computing company VMware Inc., a deal the FTC has been considering challenging.
And that’s all before Thursday, when Khan is set for a grilling on Capitol Hill by House Republicans who’ve been sharply critical of her approach to antitrust. They are sure to raise her losing courtroom record in addition to what they say are management missteps and ethical issues.
‘Not Buying the Revolution’
When Khan took over the FTC two years ago in June, her ascent was hailed by progressives concerned about the growing concentration of market power within a handful of tech giants. Khan had risen to fame as a Yale law student who wrote a number of influential articles about the danger of tech monopolies. She seemed poised to launch a new era of antitrust enforcement.
But now she’s “facing real roadblocks,” Columbia Law School’s Anu Bradford said. “The US courts are not buying into the antitrust revolution.”
As a result, Khan is “getting the reputation for making bad judgments, bringing cases that aren’t strong enough,” said John B. Kirkwood, an antitrust professor at the Seattle University School of Law.
Khan could have better luck with different judges. The FTC is leaning towards an appeal of the Microsoft-Activision ruling that could be filed as soon as Wednesday, Bloomberg reported.
Vanderbilt Law School’s Rebecca Haw Allensworth criticized the decision by US District Judge Jacqueline Scott Corley in San Francisco as too heavily focused on the immediate future, ignoring how the deal might impact competition in the longer term.
“This is a very presentist view of competition and it’s unfortunate that antitrust is stuck in that,” said Allensworth, who focuses on antitrust and tech platforms. “This is not the way CEOs think. They are being strategic and thinking about the future.”
Decision Points
The FTC has two other cases heading to court: its challenge to Amgen Inc.’s $27.8 billion takeover of Horizon Therapeutics Plc has a September trial date and one over Intercontinental Exchange Inc.’s acquisition of Black Knight Inc. is set for trial this month.
The agency is also nearing decision points on a number of other key mergers, like Broadcom-VMWare and Amazon.com Inc.’s buy-up of iRobot Corp., where the Microsoft and Meta losses are sure to be top of mind.
Like Microsoft-Activision, both the Broadcom and Amazon acquisitions involve so-called vertical deals where the merging companies operate in the same supply chain but don’t compete directly.
Challenges to vertical deals are the most difficult merger cases to win, said former FTC Chair Bill Kovacic. In the Microsoft decision, the judge harked back to two recent cases where the Justice Department unsuccessfully sought to block vertical tie-ups but the companies persuaded the courts to accept a proposed fix.
“All these courts are saying you need to have powerful facts to back it up,” said Kovacic, now a professor at George Washington University Law School. “The effort to build something on vertical policy is not successful yet.”
The European Commission, which split with the FTC in approving the Microsoft-Activision deal, agreed to accept the companies’ proposed remedy — 10-year deals to keep Activision’s popular titles on rival platforms and streaming services. The EU announced Wednesday that it had accepted a similar behavioral fix from Broadcom — a pledge to import interoperability standards into its technologies to allow rivals to compete more fairly.
‘Glorious Defeats’
Meanwhile, UK officials and the FTC have expressed concerns that Broadcom could make it more difficult for its hardware rivals to use VMware’s key software.
Though no fans of Big Tech themselves, House Republicans are on Thursday likely to seize on her setbacks as they criticize other progressive elements of her agenda, including proposed regulations on privacy and non-compete employment agreements.
Republicans have also slammed Khan for failing to recuse herself from the Meta case over past statements critical of the company. Bloomberg News reported last month that Khan declined to follow the advice of the FTC’s top ethics official that she recuse herself.
Outside of the courtroom, the FTC can point to more than a dozen deals it says have been abandoned because it raised antitrust concerns.
But Kovacic said that impressive record could change as companies assess Khan’s record of courtroom losses.
“Glorious defeats ultimately get you nowhere,” he said. “It encourages other parties to take you on more regularly.”
