Antitrust enforcers released a draft update outlining new rules today that officials say will make it easier to crack down on mergers and acquisitions that could substantially lessen competition in the US.
Now the public has 60 days to review the draft guidelines and submit comments to the Federal Trade Commission (FTC) and the Department of Justice (DOJ) before the agencies’ September 18 deadline. A fierce debate has already started between those in support and those who oppose the draft guidelines.
Any corporation should be serving the democratically elected government of a country – not the other way around. If a merger or acquisition is deemed harmful to the competitive landscape, and thus to consumers, a government should be able to just stop it. The same applies to corporations who grow too large, too rich, too powerful – if a company’s actions start to dictate significant parts of the market or even economy, they are a threat to the stability and functioning of the society it’s claiming to be a part of, and as such, they should be able to be split up or their actions otherwise remedied to protect society.
In other words, any steps the Us FTC and DOJ take to take control over runaway corporations are positive.
Nope. Corporations should be serving society as a whole, not serving the government.
Government represents society.
Government serves society.
Representation isn’t a function of government in and of itself, but it is important for fair governance.
I am glad you feel that your government represents you such that this assumption would be true. I am envious of that. But unfortunately it’s not true for all of us. For some of us our “democratic” governments have gotten so corrupt that they actually use their power to impede the public will. Here in the US both parties of the ruling duopoly are guilty of self serving. The majority of the voting public (ie 60%) dislike them both. Yet because we don’t have a rank vote, voting for the candidate you want can actually hurt your representation. Every single time there’s been a strong independent candidate, it is historically and mathamatically shown that it will just divide and cancel your vote to ensure that the opposite party wins. A rank vote would help make new more representative parties viable, but neither party in power in our political duopoly wants this to be fixed because they are self-serving.
This is before we even look at blatantly manipulative and corrupt policies enacted by self serving governments like the gerrymandering that effectively cancels the votes of large blocks of the public. There’s also the fact that workers aren’t entitled time off to go vote combined with the intentional closing of polling stations, all serving the purpose of making voting more difficult for the lower and working classes. And even the method of choosing candidates within the parties themselves are undemocratic, like using super-delegates to ensure that public voters don’t make choices the party doesn’t like.
“Government represents society.” doesn’t ring true. I find that democracy and government representation is extremely important, but the powers that be within some of our governments are no longer service us.
I was going to make the exact same point as you. Corporations and democraticly elected governments alike need to serve the public. It is awfully unfortunate that our governments have lost sight of this and no longer respect us as the root of their authority. Democracy may be lost to a facade 🙁
I disagree profoundly with the idea that corporations should serve governments. The one thing that is more democratic than elected government is the free market. Granted, this doesn’t usually exist, but in large part because of government, rather than in spite of it. You have to remember that it is governments that grant monopolies through patents, copyrights etc.
The government should be in charge of creating an environment that ensure that corporation serve the public good, but not the government, because in that path lies fascism.
mkone,
This reminds me of china where corporations serving the government is the norm. Granted Thom did say “democratically elected government of a country”, and he’s clearly on the record as opposing chinese authoritarianism. But the problem is that China consider themselves a democratic government, which undermines the notion of government serving corporations representing our interests.
https://punchng.com/is-china-really-a-real-democracy/
I agree. I really think it’s better for corporations to serve the public good and not government interests since these are not the same! Of course, we the public still need a government, but that to me is incidental. The purpose of corporations should be to serve us and not the government.
Free markets are definitely non-democratic. People with outsized wealth have vastly more power within the market, which is used primarily for the accumulation of more wealth at the expense of those with less power, thus further increasing their power. That is not democracy.
It isn’t democracy when the decisions that transferred public wealth (and thus power) into private hands were made a century or more before any of us were born
Thom Holwerda,
The other comments including mine have gotten sidetracked by focusing on one tiny aspect of your post. But just to be clear I agree with your opinion that corporations have gotten too powerful to serve public interests. When this happens they actually cause more harm than good. Allowing their power to continue unchecked results in monopolization with a few entities controlling entire markets. So I agree with the need to intervene for the public good. Unfortunately we have a bad track record at least in the US. We generally allow abusive practices to continue unabated for decades and the public suffers for it. This form of monopolistic capitalism is unhealthy and ends up nullifying the benefits of free market competition.
Alfman,
While I agree with the sentiment, especially against forming or abusing monopolies, this FTC is unfortunately not the right tool against those.
They have been losing time, and taxpayer money on frivolous lawsuits, even when they have actual work to be done.
For example, getting those who exploit children financially to pay back to consumers:
https://www.ftc.gov/news-events/news/press-releases/2023/03/ftc-finalizes-order-requiring-fortnite-maker-epic-games-pay-245-million-tricking-users-making
But their track record could not be defended when it counts, where they were up for review at the Congress:
https://www.reuters.com/world/us/us-ftc-chair-face-questions-court-losses-congressional-hearing-2023-07-13/
Not only they could not get the budget increase they asked for, FTC lost one quarter of their old budget.
All because they have lost focus, and went on a short sighted agenda, instead of their institutional mandate. We need a strong FTC with the correct direction.
sukru,
As to whether the FTC is the right agency, probably not. But we have to take what we can get. The US track record is such that corporations keep getting away with abusive tactics. They make trillions while depriving us of choice and competition. The thing is there’s always going to be other crimes to pursue; someone is always going to say not to bother with it before some other crimes are solved. but that translates to “never” because the work is really never done.
Honestly I’m not a fan of prosecuting companies with punitive measures after the fact, but we still need a way to curb the feedback loops that lead to total dominance. I’d much rather have progressive rules and preemptive measures that automatically apply to get us back on track before corporations become too dominant. There wouldn’t be a need to wait for decades of monopoly abuses to prosecute them at great expense if we just had a self-balancing system in the first place. IMHO such balances are a worthy goal for society, but alas the incumbents who are the benefactors of imbalance will never go for it because the imbalance benefits them at the cost of everyone else.
Alfman,
I have been following this case (as I have also invested in ABK after hearing about the deal). But so far FTC has been the most counter-productive one among the all jurisdictions, and I am not saying this just as a proponent of the deal.
EU for example, was able to extract very useful concessions. Vestager convinced them to offer any cloud company 10 year deals for Microsoft’s own games. In fact for the first time ever they were released on nVidia, and others like Boosteroid (at least with permission).
UK’s CMA was initially blocking the deal, but this week they came together to build a joint plan to best serve the British consumers.
US tech union CWA has made deals with Microsoft spanning all their gaming companies to voluntarily recognize unionization efforts.
And so on.
FTC, however decided not to even research the market, and just move against the merger since the number was very large. They failed to make any concessions, and they have lost energy fighting a baseless case.
In the same time, they also lost their funding.
All of these could be avoided if they wanted to their job from the beginning. They were literally the only losers in here.
(Hint: it was Sony, the market leader, abusing their position in an anti-competitive manner. But even Sony has made a deal with Microsoft to secure games on their platform).
sukru,
I don’t think it’s entirely fair to criticize the FTC by comparing it to the EU. Here in the US we’ve got a very corrupt system with many members of all branches of government holding financial stakes in the businesses they oversee.
https://www.msnbc.com/opinion/stocks-owned-supreme-court-justices-tilt-scales-justice-n1280712
We can accuse monopoly busters as being incompetent, but here in the US they’re really being setup to fail and the monopolists hold much more power than the public realizes. I don’t know if the FTC’s new rules will change anything, but I do know it’s an uphill battle for them.
Alfman,.
I think it is fair to compare them against their peers, which have achieved reasonable success.
FTC did not even research the market they were supposed to regulate. And following the court proceedings, they did not even have any valid case, nor any witnesses, nor field experts to support them.
(They could have easily had a case, if they did not focus on protecting the market leader. For example, the cloud concern was valid, like EU brought).
They have clearly failed to fulfill their duty. They could have gone for behavioral and/or structural remedies, and bring fruitful conclusion. Instead they lost goodwill, reputation, and a sizable portion of their budget.
(missed edit)
The short summary is:
The problem is not that FTC were doing their job,
but alas, they were trying very hard not do to it.
sukru,
Strategies and policies that succeed in the EU won’t necessarily succeed here because the political environments are so different. I think it’s important to recognize this.
I sense a lot of resentment and hostility towards the FTC.. I’m not trying to defend the agency per say, but if they just keep allowing huge corporations to merge & consolidate then every industry is going to become increasingly monopolized by modern day robber barons who control everything. IMHO we would be wise to do everything we can to avoid this fate for future generations. So I am not bothered by FTC trying to stop monopolies from owning everything, but I am more bothered by the fact that the top corporations keep becoming more dominant to no end.
We may have to disagree and move on to the next topic of discussion 🙂
Alfman,
I am sorry, I don’t think I can convince you FTC could have taken much different steps with different results.
But I can say at least the courts, and the government in the USA do not agree with their approach so far.
Sorry,
I might be going too strong with my opinions here.
sukru,
No need to apologize! I can appreciate that you have a different perspective and I respect your opinion. I enjoy having you around 🙂
I have impression that the task of keeping corporations in check is in the US is left to the judiciary system rather than government regulation. The tools like class action allow it to be an effective enforcer of citizen rights, though usually it’s reactive and some people pay the price of the this system learning. It’s a key systemic difference with the EU.
Corporations (at least in a capitalist society) are only there to serve their shareholders. That is it. In general the way they do that is by providing goods and services to their customers. If they fail to do that, then they will lose all their money and fail. If they grow so big that no one else can compete fairly, then generally the innovation can stop and they stop caring about the customer, and everyone loses (unless of course they figured out a scheme to get customers to keep paying… *cough* Comcast *cough*. ) I argued this a lot with some people who think that the antI-monopoly laws are dumb. I have heard this from a few Apple fans…
The question is: will these rules survive review by juristical scrutiny.
Remember, so far, this FTC administration lost (almost?) all cases brought to Federal courts. And no, the judges were appointed by all sorts of presidents, including Clinton, Bush, Trump, and Biden.
They just lost another famous case last week, against Activision and Microsoft, twice by two different courts. And even after that, at this point in time they are the only anti-trust organization in world that still wants to pursue that matter. (The same deal was approved by EU, China, Brazil, and even UK’s CMA is now working on a final deal).
So, yes, they can bring any guideline they want. But at the end of the day, unless Congress changes the rules, they don’t mean much. Or, looking at how unconstitutional these rules are, they might even be used as a negative against them in the courts.
(Another take by an actual lawyer experienced in this topic).
https://twitter.com/FOSSpatents/status/1681729690803814427
sukru,
It needs to be disclosed that he has worked for both microsoft and blizzard, so he’s not quite an impartial observer. Furthermore he’s citing a law firm that represents google. I am glad he discloses these conflicts of interest at least. It’s totally unsurprising that they disagree with busting monopolies given their relationship to them, so of course they’re going to want to fight this. But that doesn’t necessarily mean the monopolies & oligopolies aren’t causing real harm to society.
Alfman,
Without (too much) repeating myself, here the market dominant position was Sony’s, and the proposed merged entity would at best be third, or depending on whether you include Apple, Google, and international ones like Tencent, probably 4th, 5th, or even 6th position in the wider gaming market.
FTC, like many others, have made the same mistake. Seeing “Microsoft” and “almost 70 billion dollars”, decided this was an anti-competitive merger, even though it was a “pro-competitive” one.
And the courts also decided in that manner. From the judge’s own conclusion:
Every case need to be considered based on their merits. For example, if Microsoft were to purchase Slack, which has a much smaller value, but combined with Teams and Skype, unlike this case it would easily be considered a “de facto monopoly”, that would be a real concern.
sukru,
Globally maybe, but are you looking at US data?
https://gamingsmart.com/playstation-5-vs-xbox-series-x/
But…microsoft already has a gaming monopoly and that’s just on console. It would be even higher if we include windows gaming. This purchase will serve to make that monopoly greater.
Alfman,
I am not sure where they get their marketshare numbers, but they seem to have no basis. They also make the same mistake of removing Nintendo from the competition. That idea is rejected by all courts in all countries, including the USA.
I would recommend looking at the court proceedings.
The final order is available here:
https://storage.courtlistener.com/recap/gov.uscourts.cand.413969/gov.uscourts.cand.413969.327.0_1.pdf
Along with all other documents:
https://www.courtlistener.com/docket/67494594/federal-trade-commission-v-microsoft-corporation/
No, Microsoft does not have a gaming monopoly, if they did the court would have taken a much different path.
sukru,
I don’t mind using another source for US sales data, if you have it. Ideally I wanted to look at game sales rather than hardware sales. After all microsoft’s own gaming strategy is not centered around xbox…
https://www.businessinsider.com/xbox-vs-playstation-microsoft-strategy-2020-5
Regrettably I was unable to find aggregate gaming IP marketshare data specifically.
I still believe that microsoft are the dominant gaming IP owner after all of their acquisitions, but if you have a source proving otherwise, I’ll recant.
https://www.pcgamer.com/every-game-and-studio-microsoft-now-owns/
Regarding the courts taking a different path for monopolies, that’s really not a given. After all, the antitrust case against microsoft in the 90s got overturned despite 90%+ market share and many well documented abuses. For better or worse, US courts can and do side with monopolies even when the complaints against them are well founded.
Alfman,
This court case was about Global Gaming Console Market.
Microsoft’s own lawyers wanted to include PC in that market, but it was rejected.
FTC wanted to limit to USA, and I think it was also rejected. But would not change the outcome significantly.
According to the “redacted” figures, Xbox is last in terms of marketshare, and also the actual usage time:
According to discussions it is 16% and 21% respectively for the Xbox (I think this came from their filing): https://www.thewrap.com/microsoft-nintendo-xbox-sony-console-market-share/
So, no, they are nowhere near monopoly in the Console Gaming Space.
One fallacy FTC tried to pull was limiting the market to Sony and Microsoft only, excluding Nintendo. However even then, even the PS4 has outsold newer Xbox 2:1: https://gameluster.com/court-documents-confirm-xbox-one-sold-less-than-half-ps4-numbers/
According to the analysis site vgchartz, it is still trailing behind by a wide margin: https://www.vgchartz.com/
Anyway, in any if, FTC did two major mistakes:
1. They did not investigate the market (which would be a simple Google query), and see it was actually Sony dominated, and they used anti-competitive tactics against Microsoft.
2. Even though they themselves knew they had no case, they used legal gamesmanship (read; delaying tactics) to go against a legitimate merger.
If they had any legitimate concerns, they could have filed in court back in December 2022, when they reached their conclusions.
They had to file now, since Microsoft and Activision decided to ignore them, and they have lost.
sukru,
Are you sure? I don’t know whether international marketshare played into the lawsuit, but I do know that neither the FTC nor federal courts have any jurisdiction outside the US and they’re supposed to be representing the interests of US consumers and not those world-wide.
I saw that too, almost all the numbers I wanted to see were redacted. Unfortunately the redactions make these documents kind of unusable to me as a source. This isn’t your fault, but still it means we need another source, or unredacted copy to get the information.
However, just to entertain the line of reasoning without any numbers, lets just assume xbox has a negligible 1% hardware market share – can you agree that it doesn’t actually prove anything about microsoft’s gaming IP marketshare? They could still technically be dominant in the gaming studios & IP space without being dominant in the hardware space. Furthermore this actually makes sense given microsoft’s multiplatform direction for gaming.
You seem to be entirely focused on global xbox hardware units at the exclusion of other considerations. What about studio & IP marketshare though? Do we really want the FTC to allow microsoft to buy as many game studios as they want as long as xbox hardware units are kept in check?
Here’s a fabricated example just to make this point clear: say MS had 1% hardware marketshare but a 70% game studio/IP market share, is xbox hardware marketshare still all that matters in your opinion?
I still think it’s plausible that microsoft could end up with a dominant marketshare of gaming studios & IP with the activision merger.. I think we need more data to be conclusive though.
Alfman,
We can’t make any progress if we start with “Microsoft is a monopoly in the gaming market, and I just need to find evidence to support that”.
The discussion should always include the possibility of reaching either of these conclusions.
And…
They are not even in a dominant position, and it very easy to prove this mathematically.
According to many sources, Mobile is the largest platform, far surpassing PC and Console combined (and Cloud does not even make a dent):
https://www.data.ai/en/insights/mobile-gaming/2022-gaming-spotlight-report/
That means in order to be dominant in the overall gaming area, not the consoles only, they have to be dominant in the mobile, there is no other way around it.
https://youtu.be/RcMoi1wNagA?t=174
And their best entry on that market is ranked at 60+ in terms of revenue (Minecraft):
https://vgsales.fandom.com/wiki/List_of_highest-grossing_mobile_games
Basically they are non-existent there. Activision has some presence, but as far as I know it is less than 5%.
How can they be dominant (after the merger) if they only have less than 5% presence in more than half of the market?
(And if we start removing random parts of the market from the calculation to carve out a narrow area where Microsoft is dominant; can’t we also say: “Sony is the monopoly in developing God of War licensed games?”)
To do a valid analysis of competitive effects, we first need to define the market in which these competition would be investigated.
1. Global Gaming Market
None of the consumer agencies in any country considered this, since Microsoft is but a minor player in the largest market definition.
2. Game Publishing Market
It could be reasoned that since Microsoft owns Bethesda, Xbox Game Publishing and Microsoft Studios, this merger with Activision could be considered horizontal. However given the share of the combined entity in this market, again as far as I know this was not even considered.
3. Console Gaming Market
This is were FTC wanted to attack the merger. However it also did not make sense, as Microsoft is in the third position by a wide margin. (Hence many other jurisdictions did only summary investigation, and quickly approved for this case).
Since FTC also knew they did not have a valid claim, they tried to make up a “high end console market”, which excluded Nintendo. However courts did not agree with that arbitrary definition.
4. Cloud Gaming Market
This is actually a valid claim, since Microsoft has a sizable presence in the market, and has reach to the most amount of players. (Though they don’t come close when active usage is considered. Many GPU members just don’t play games on the cloud).
Hence EU and CMA focused on this area, and EU got very reasonable concessions, including open licensing deals for any competitor. (And CMA decided to block, but their math was incorrect. They are now in discussions wit MS/ABK for a final agreement).
5. Mobile Gaming Market
This is where Microsoft wanted to focus. And it actually makes sense for the long term strategy. However as far as I know, none of the agencies wanted to be limited in this scope
6. Gaming Subscription Services Market
There were attempts to define this as a separate market than regular purchases. However since this is only an alternative payment method, it was ultimately dropped.
Without choosing one of these markets, we can’t reach to a valid conclusion.
sukru,
So I take it you want to count mobile and PC and console as the same market? (more on this later…)
Using the list you linked to, I calculate activision’s share to be roughly 6.8%. It’s incomplete and doesn’t necessarily reflect current market share, but it’s probably the best data we’ll find for mobile so thank you for linking it.
I agree with you on this. The way we break down markets can be complicated and arbitrary. In my view a common sense approach would be to break up the market as a real consumer would when making a purchase. Are two products competing for the same customer use cases? I propose that mobile doesn’t quite fit in the same market as gaming pc and consoles. But home gaming PCs and consoles do fit in the same market because a typical gamer could consider either for their home gaming needs. They are far more similar to each other than to a mobile device. So I don’t think it’s unreasonable to make the case that mobile is a completely different market, though I admit you might find this subjective.
I still maintain that it is very wrong to use the hardware marketshare data instead of studio & IP marketshare data.
For a car analogy, it’s like saying Toyota should is allowed to amass a monopoly stake in tire manufacturers because Toyota’s car market share is only 15%. Just because Toyata is not dominant in the car market doesn’t mean their acquisitions would not create a dominant position in the tire market. In other words, it is fair game to raise antitrust issues for the tire market even though Toyota only has 15% of the car market. That’s the point.
Secondly, xbox hardware marketshare can paint a completely misleading picture of microsoft’s IP given that microsoft has loads of titles that aren’t specific to xbox, even running on playstation.
So I really hope that we can agree that xbox marketshare is the wrong metric to be using for determining whether Microsoft’s studio acquisitions will make them dominant.
(okay, another missed edit)
FTC is a consumer protection agency, not a Sony protection agency.
And, unfortunately, this had to be reminded them, multiple times during the court.
Their lawyers still blatantly tried to negotiate on behalf of Sony, and judge had to shut them down, again multiple times.
When presented with facts, instead of realigning their position, they decided to double down.
Don’t be like them.
The US should bust the health insurers market wide open. After the latest mergers only three companies control the vast majority of the market “Aetna-Humana, Anthem-Cigna, and United Health Group” in most of the states. That is partly why prices are skyrocketing.
I agree, For all of the complaints about the public sector not being efficient, the overhead of our private insurance system in the US is insane. There’s no incentive to fix this, more overhead = more profits and meanwhile people are obligated to have health insurance policies by law.
I should disclose that I’ve done some IT work for a major health insurance company.