Lina Khan Is Taking on the World’s Biggest Tech Companies—and Losing

Khan failed Tuesday in her latest effort to block a big-tech deal when a federal judge denied her agency’s bid to block Microsoft from closing its purchase of videogame publisher Activision Blizzard. The FTC suffered a similar setback earlier this year when it tried to thwart Meta Platforms’ purchase of a virtual-reality gaming company.

Khan, who gained prominence as a critic of Amazon.com, entered office in 2021 vowing to stiffen antitrust enforcement. Past enforcers were too cautious about bringing tough cases, she has said, and failed to confront the rise of companies such as Facebook owner Meta that gained monopoly-like power in digital industries, she said.

“I’m certainly not someone who thinks success is marked by a 100% court record,” Khan said last year in remarks at the University of Chicago. “If you just never bring those hard cases, I think there is severe cost to that, that can lead to stagnation and stasis.”

Under the Biden administration, antitrust agencies have challenged more mergers than in previous years, including some that historically the government wouldn’t have tried to block. Microsoft and Activision aren’t head-to-head competitors, making the case against the deal less straightforward and more dependent on the FTC’s prediction that the combined company would abuse its power to hurt competition in the future.

In her opinion issued Tuesday, U.S. District Judge Jacqueline Scott Corley wrote that the FTC failed to show evidence backing up its claim that Microsoft was likely to withhold Activision’s blockbuster games from competitors such as Sony. The judge found instead that Microsoft had made commitments to share Activision’s content, which would expand consumers’ access to its biggest game franchise, Call of Duty.

Douglas Farrar, an FTC spokesman, said the merger posed a “clear threat” to competition and suggested the agency could soon announce an appeal. “In the coming days we’ll be announcing our next step to continue our fight to preserve competition and protect consumers,” he said.

Antitrust attorneys say the FTC’s case against Microsoft resembles an earlier attempt to block a gargantuan media deal: AT&T’s acquisition of Time Warner.

Both cases were examples of vertical mergers, a type of deal that courts generally regard as beneficial to consumers. When a vertical deal looked problematic, the government often sought a company’s commitment to maintain the status quo regarding competition. The Justice Department’s 2017 lawsuit to block AT&T-Time Warner’s deal was the first litigated vertical-merger challenge in 40 years.

Both cases also involved claims that the buyer would harm competition by making must-have entertainment exclusive to its own platform or devices. That didn’t work for the Justice Department, which lost the A&T case at a district court and on appeal.

Corley at one point questioned why the FTC put so much emphasis on what would happen to Call of Duty. “This is for a shooter videogame,” she said. Microsoft wouldn’t be able to make Call of Duty exclusive because it had already committed to selling it to Sony and others, she wrote.

The FTC could continue to pursue a separate lawsuit against the deal in its in-house, or administrative, court. More often than not, the FTC drops its administrative case after a federal judge denies an injunction blocking the deal.

The FTC and the Justice Department challenged 10 mergers in court last year, up from six in 2021 and eight in 2020, according to data compiled by law firm Dechert. This year, the agencies have sued to block or undo four deals, involving Amgen, JetBlue, Intercontinental Exchange and a Louisiana hospital system, according to government data.

Antitrust experts expect Khan to continue bringing tough cases because she wants courts to expand how they view competitive harm. Merger case law puts too much emphasis on whether a deal will lead to higher prices for consumers, she says. Khan wants the law to consider other problems that might flow from consolidation, including lower wages for workers, diminished innovation and lower levels of service or quality.

“It’s a very difficult and slow process to get judges to look at some of these novel theories,” said Jennifer Rie, a senior litigation analyst at Bloomberg Intelligence. The FTC “needs to pick better battles, battles where they have better evidence backing up their allegations.”

Khan’s FTC and the Justice Department are expected to soon issue new guidelines that will provide a deeper dive into their views on mergers—giving companies a better idea of which deals will be allowed or challenged.

The guidelines are designed to support future merger challenges. But Khan and her counterpart at the Justice Department, Assistant Attorney General Jonathan Kanter, also need to win some of their novel cases before the end of the Biden administration’s term or companies will begin to tune out their warnings, attorneys say.

“There has been progress, but there has also been these losses,” said Diana Moss, president of the American Antitrust Institute, which advocates for stricter antitrust enforcement. “The clock is ticking.”