The youngest chair in FTC history should familiarize herself with how the video game industry has survived and thrived since its inception instead of blocking mergers that would benefit consumers.

The video game industry is getting a lot of attention lately thanks to both exciting tech advancements and unprecedented interference by the Federal Trade Commission (FTC). The sector has witnessed substantial growth in recent years, which is why antitrust concerns are being raised by Federal Trade Commission (FTC) Chair, Lina Khan. It can often feel like ancient history, but video gaming’s future hasn’t always been so bright in the U.S. In fact, it was almost “game over” for the business at the start of the 1980s.

The 1983 Video Game Crash, as it is known today by industry insiders, left the market for video games with no clear path to recovery. A primary culprit for the industry’s downfall was third party publishers, who were flooding the market with subpar products. Up until this time, Activision was a primary provider of video games, and with interest in gaming growing fast, other opportunistic firms sought to get in on the action by offering lower-priced, lower-quality games to consumers.

Parents would scoop up a handful of these off-brand games for the price of one Activision video game, assuming that their kids would be thrilled. They quickly learn this was not the case.

User reviews didn’t exist at this time and since parents weren’t consulting other children for feedback on the games being sold, it was hard to be clued in on what was worth buying.

Trust in the gaming market dropped, and increasingly risk-averse consumers were hesitant to buy the top-shelf games for fear of being duped again.

It wasn’t until Nintendo released the Nintendo Entertainment System in 1985 that interest in gaming rebounded. Super Mario Bros, along with other addictive games like Tetris, Atari’s Gauntlet, and Sega’s OutRun, restored interest and faith in gaming products. Since then, the industry has grown at an impressive rate.

Access and options for gamers have dramatically improved thanks to techinnovations in mobile gaming, as well as the surge of engagement duringthe COVID-19 lockdowns. Consumers were particularly eager for novel in-home entertainment, and multiplayer as well as online-based gaming allowed them to connect and create affinity networks like never before. And though the pandemic was a nightmare for millions of Americans, gaming has been credited as “a positive force in the field of mental health.”

Today gaming is big business, on track to be worth $321 billion by 2026, which is why Lina Khan and the FTC have their sights set on the sector. Since her appointment as FTC Chair by President Joe Biden, Khan has made clear her negative view of corporate growth, which is unfortunate, given that US gaming firms have yet to catch up with the likes of Japan’s Sony Interactive Entertainment Studios.

The Japanese juggernaut’s long march toward market dominancesolidified in 2020 when Sony released the Playstation 5 (PS5), which quicklybecame the global favorite for next-generation gaming consoles.

In response, Microsoft’s US-based Xbox Games Studios went on defense,announcing its plan to purchase Activision-Blizzard in January 2022. The merger brought Guitar Hero, World of Warcraft, Call of Duty, Diablo, and Candy Crush Saga all under one roof. Microsoft’s interest, therefore, is unsurprising, but this mutually beneficial business transaction between Microsoft and Activision-Blizzard was enough to draw the attention and legal might of Lina Khan’s FTC.

Instead of allowing Microsoft to improve its competitive stance against Sony, the FTC sought to block the merger. The legal battle turned out to be a huge waste of time and resources at taxpayers expense. What is particularly puzzling is the fact that other jurisdictions around the world were already greenlighting the deal, and yet our own government opposed an American firm’s advancement against a foreign entity with 70 percent market share.

Fortunately for Microsoft, Khan’s claims against the merger carried little weight in court. Unfortunately for Khan, her failed filing has led many to call into question her understanding of business and antitrust law. For instance, the FTC asserted that the merger could result in Microsoft restricting Activision-Blizzard games only to Xbox consoles, an unconvincing claim given Microsoft’s standing commitment to maintain the distribution status quo with Sony.

The hypocrisy was clear to gamers watching the case play out in court, who are most all aware that Sony’s popular title, The Last of Us, is only available on PlayStation consoles. And who is to say there is anything wrong with exclusivity in the first place?

The role of the FTC is to ensure consumer welfare in the marketplace, and right now it seems Khan is willfully overstepping her authority. It’s unclear who exactly she thinks the FTC is protecting in slowing down Microsoft. The FTC’s interference is delaying opportunities for gamers and developers at a time when creativity for gaming content is really taking off. Although the 2020 lockdowns surged interest in gaming users, the ability for developers to collaborate and curate new games has been hampered by remote work and other hardships brought on by the pandemic.

If we have learned any lessons from the Video Game Crash of 1983, it should be that improvements in gaming access and quality should be encouraged, not derailed. Today’s gamers have high expectations for new and innovative experiences, and FTC interference only gets in the way of content development and distribution.

Though the great gaming crash occurred just before Lina Khan was born, the FTC’s youngest chair in its history should familiarize herself with how this industry has survived and thrived since its inception. Gamers call the shots, and like other consumers, they’re the most powerful source of accountability for an industry supported by their hard-earned dollars.

The FTC stepped far outside its lane at the expense of taxpayers, and one can only hope that a lesson was learned.

Originally published here

The U.S. Federal Trade Commission cannot stop Microsoft’s proposed $69 billion purchase of Activision Blizzard, a California judge ruled on Tuesday.

The deal, originally announced 17 months ago, can now move forward by the July 18 deadline. 

In her ruling, Judge Jacqueline Scott Corley said, “Microsoft’s acquisition of Activision has been described as the largest in tech history,” and “it deserves scrutiny.”

“Microsoft has committed in writing, in public, and in court to keep Call of Duty on PlayStation for 10 years on parity with Xbox,” she continued. “It made an agreement with Nintendo to bring Call of Duty to Switch. And it entered several agreements for the first-time to bring Activision’s content to several cloud gaming services.”

“The Court finds the FTC has not shown a likelihood it will prevail on its claim this particular vertical merger in this specific industry may substantially lessen competition, and “the motion for a preliminary injunction is therefore denied,” Corley added.

The Activision purchase will give Microsoft ownership of popular video game titles like Call of Duty, World of Warcraft and Candy Crush.

The FTC wanted to block the deal because the trade regulator believed Activision’s incorporation into Microsoft would hurt competition in the video game industry.

In an interview with FOX Business, Stephen Kent at the Consumer Choice Center, said “Judge Corley showed a deep respect for consumer interest, namely the gamers who will be most impacted by Microsoft acquiring Activision-Blizzard. 

“Biden’s FTC under Lina Khan has shown no interest in consumer protection, as illustrated throughout the hearings and pointed out on the final day by Judge Corley herself,” he said. “President Biden should be taking note of how poor FTC Chair Lina Khan has been at her job, and how far she’s strayed from the mission of consumer protection.”

Read the full text here

Lina Khan is one of the most radical chairs of the Federal Trade Commission (FTC) the United States has ever seen. Luckily for consumers, Khan has not been very successful. The latest evidence comes from San Francisco, where Judge Jacqueline Scott Corley of the United States District Court for the Northern District of California is presiding over the FTC v. Microsoft & Activision Blizzard’s preliminary injunction hearing.

The suit was brought on by the FTC over its expressed antitrust concerns for the burgeoning cloud video gaming industry. It’s not going well, and it’s because Khan is not guided by the traditional metrics of consumer protection and welfare that have long characterized the FTC’s approach to antitrust enforcement.

Coming off a predictable defeat in court against Meta over its bid to acquire the virtual-reality fitness company Within, President Biden’s antitrust warrior appears to have learned little. The FTC chair’s approach to blocking Meta’s purchase was to harken to an ominous “campaign to conquer VR” by Mark Zuckerberg, based on his previous acquisition of Oculus for the purpose of developing Meta’s capacity for VR headsets.

Where most see these tech acquisition deals as a simple matter of comparative advantage for companies looking to serve consumers better products at better prices, Lina Khan appears to see only the phantom of Standard Oil magnate John D. Rockefeller. It’s why her agency has adopted a more radical posture around antitrust policy, expanding its view of what constitutes unfair competition in a 2022 policy statement to include Yale-worthy buzzwords “exploitative, collusive, abusive” in its framework for identifying antitrust violations. The vagueness is the point.

In the minds of progressives like Khan who romanticize the antitrust battlesof the early 20th century, they’re carrying the banner against predatory price schemes and corporate monopolies. However, in nearly every fight Khan’s FTC has picked with big business (Amazon, Meta, Microsoft) since 2021, Khan has demonstrated what she wrote in the Yale Law Journal in 2017, that, “Animating these critiques is not a concern about harms to consumer welfare, but the broader set of ills and hazards that a lack of competition breeds.”

Khan fears corporate expansion (“powers we oppose”) of all kinds and believes it is the role of the federal government to erect obstacles and throw stones to slow their efforts, even when consumers are voting enthusiastically with their dollars for exactly what the tech sector is offering.

In the case of FTC v. Microsoft & Activision Blizzard, Khan’s first week in court has been an embarrassment. At issue is whether or not Microsoft absorbing Activision-Blizzard presents a unique threat to competition within the cloud gaming space. Some video game companies keep their licensed games within the walled gardens of their console, such as Nintendo with access to Mario Kart or The Legend of Zelda. Others license their games cross-platform, such as Activision and their top hit, Call of Duty. For reasons unknown, the FTC has made it their mission to ensure that PlayStation, a Japanese company, has ready access to Call of Duty for its users.

Microsoft has offered a number of long-term licensing deals during this process to display good faith and disinterest in cutting off Sony from its major titles. It’s bad business for both parties. At the outset of the hearings, it was revealed via internal emails from within Sony, the unquestioned global leader in video game consoles and chief advocate of the FTC’s crusade, that they didn’t really care much at all about Call of Duty. In the words of Sony CEO Jim Ryan about Microsoft-Activision, “I don’t want a new Call of Duty deal. I just want to block your merger.”

Sony is who the FTC is working to protect, and American consumers should wonder why.

If the federal government is trying to block a company from being acquired, typically that company’s stock price doesn’t go up — but Activision’s has. That’s because, for almost everyone watching, it has become clear that Lina Khan’s FTC is not bringing a case to protect American consumers from corporate predation or an uncompetitive marketplace, but instead to merely make their presence known.

This is how chaperons act on a school field trip or middle school dance; they just want you to know they see you. Only in this case, “being seen” means millions in legal fees for all parties involved, including the public, who foots the bill for proceedings. 

It’s trolling on a multimillion-dollar government budget, and while it’s beneath the dignity of an institution dedicated to a level playing field for businesses and consumers alike, it’s very much on brand for Lina Khan.

Originally published here

New legislation and an antitrust lawsuit threaten Apple’s monopoly over its App Store. The Department of Justice recently joined Fortnite developer Epic Games in appealing the latter’s failed 2020 lawsuit against Apple. Epic alleges that the tech giant’s exorbitant 30 percent commission on in-app transactions, which users are forced to conduct through the App Store, violates competition laws and harms consumers. 

Meanwhile, Congress could soon pass the Open App Markets Act (OAMA), a bipartisan bill that would stop app platforms from monopolizing payment systems for in-app transactions, restrict them from preferencing their own apps over competitors’ in-store, and require them to permit “sideloading” — the installation of unverified third-party apps outside of official app marketplaces.

This could give smartphone users access to more apps while increasing competition between developers. Lower entry barriers into the lucrative iPhone app market of more than 118 million Americans could spur innovation in apps that may not have been viable before. It would also encourage investment in developer start-ups and could lower prices for in-app purchases, including for emerging technologies like NFTs, by allowing developers to circumvent Apple’s commissions through alternative digital payment methods.

But is there more to the story?

Users aren’t likely to abandon their iPhones for competitors over costly in-app fees and a sideloading ban once locked in. Conversely, they may see this as a trade-off for better app vetting and data security and privacy controls that Apple promises. Android phones don’t levy 30 percent commissions on in-app transactions, but Google collects and monetizes user data for targeted advertising to a greater degree with fewer controls. 

Though conversely, analysts note that Apple’s own data collection and monetization also fuels its growing ad business, which is expected to grow to $20 billion/year in revenues by 2025. Sideloading outside the App store certainly threatens this segment of Apple’s business.

As for security, discerning adults can trust themselves in navigating less restrictive app marketplaces or in taking precautions if they sideload unverified apps. But the same can’t be said for vulnerable demographics like children or the elderly.

Though the OAMA permits smartphone operating systems to restrict or remove apps over legitimate security and privacy concerns, this may be difficult to implement regarding sideloading. A 2020 Nokia cybersecurity reportblamed sideloading, which is already possible on Android devices, for 15 to 47 times higher rates of malware infection on those devices relative to iPhones.

In any case, Google and Apple’s alternative business models have resulted in a split smartphone market. Apple holds 59 percent of the American market, while the global market is dominated by Android, whose share is 72.2 percent. Both companies face competition from alternative smartphone manufacturers like Huawei and non-smartphone app marketplaces, including gaming consoles like the Xbox, which are exempt from the OAMA.

In a competitive market where users already choose what they value, is a legislative or court mandate limiting companies’ abilities to tailor platforms to their user base necessary or desirable? The ability to monetize the app marketplace funds capital-intensive investment in platform and app ecosystem development. Stymying this ability could harm consumers by discouraging innovation and competition between platforms.

And if Target or Walmart’s ability to “self-preference” by placing home brand products in prime locations relative to competing alternatives is an accepted business practice that isn’t seen as “anti-competitive,” then how is self-preferencing on digital platforms different? Consumers already discern between brands and often choose alternatives for reasons other than cost or product placement — whether online or at brick-and-mortar stores. Placing limitations on self-preferencing may result in stores or platforms levying higher prices from consumers elsewhere or offering fewer choices.

The OAMA is likely to yield greater choices in apps for Apple customers and greater opportunities for developers. But there could still be some adverse long-term consequences. At the very least, provisions that restrict self-preferencing should be reconsidered as they won’t meaningfully increase choices consumers already face.

Originally published here