FTC breakup raises hopes for Microsoft's $69 billion Activision merger: sources

FTC breakup raises hopes for Microsoft’s $69 billion Activision merger: sources

A rift has emerged at the Federal Trade Commission over Microsoft’s $69 billion deal to acquire Activision – potentially paving the way for the controversial mega-merger to be approved, The Post has learned.

At least one Democrat on the four-member panel recently took a favorable view of the merger, according to a source familiar with the matter. That, in turn, could create a rocky road for FTC Chairwoman Lina Khan — who, according to insiders, has seen Microsoft’s deal as a major target as she seeks to restore her credentials in as trustbuster of Big Tech.

Sources said Khan – who said publicly in June that the agency was reviewing the impact of the deal on workers – was still pushing in recent weeks to sue to block the merger, which would involve Microsoft’s Xbox to hit Activision games like “Call of Duty” and “Candy.” Crush.” ​​Late last month, Politico reported that legal action by the FTC against the deal was “likely,” noting that agency staff are “skeptical of the companies’ arguments.”

The FTC’s only Republican commissioner, Christine Wilson, signaled her support for the deal. But sources say that at least one of the three Democratic commissioners on the four-member panel – which besides Khan include Rebecca Slaughter and Alvaro Bedoya – has also recently appeared to lean towards the Microsoft camp, according to a source close to the company. situation.

FTC Commissioner Rebecca Slaughter seated at a Congressi
FTC Commissioner Rebecca Slaughter was the attorney for Senate Majority Leader Charles Schumer, and Schumer recently met with Microsoft.
Bloomberg via Getty Images

“Some Democrats might be more comfortable with a settlement,” approving the deal with concessions from the companies instead of trying to block it outright, an FTC insider told the Post.

While the dissident Democrat’s identity could not be immediately confirmed, DC sources following the situation pointed to Slaughter, who served as the FTC’s acting chairman until last year, when President Joe Biden said. installed Khan, 33, at the head of the powerful regulator. agency.

A Democratic defection would leave Khan with a 2-2 tie in any vote to suppress the merger — an outcome that would not only effectively accept the deal, but also challenge Khan’s authority over the agency. So it’s a vote Khan is unlikely to risk, according to DC insiders.

“Lina probably wouldn’t set things up for that to happen, so instead of having that vote, she would put the motion to approve the settlement,” former FTC Chairman William Kovacic said. “The solution is to say, ‘We got a lot and we only got it because we were badass. “”

Microsoft has a habit of courting Democrats. In the 2020 election cycle, Microsoft donated $13.8 million to Democrats and just $1.72 million to Republicans. In 2022, he gave $4.1 million to Democrats and $1 million to Republicans, according to Open Secrets.

Rebecca Slaughter on a monitor with her young child.
Politicians will likely call commissioners like mother Rebecca Slaughter to urge them to support the merger.

Senate Majority Leader Chuck Schumer reportedly traveled to Washington state in July to meet with Microsoft Chairman Brad Smith to discuss, among other things, the impending Activision merger and its potential impact. on New York. They also reportedly met in February.

Insiders note that Slaughter served as Schumer’s chief counsel from June 2014 to May 2018 before leaving to become FTC commissioner.

“That’s when Schumer calls his old protege and says, ‘What’s up? according to Kovacic.

Meanwhile, reports have surfaced in recent days that Microsoft has signaled it’s willing to make significant concessions to complete the deal. Last week, Reuters reported that Microsoft was likely to offer a 10-year licensing deal for its hit “Call of Duty” franchise to Playstation owner Sony, citing unnamed sources.

As The Post reported early last month, Microsoft’s stubborn refusal to offer any concrete concessions to regulators and rivals in return for securing the deal has been a major sticking point. If Microsoft finally shows a willingness to budge, it weakens any FTC case to block the merger — and emboldens dissenters, experts say.

“What makes it difficult is when Microsoft goes to its friends in blue and says, ‘We’ve provided a set of solutions for all perceived problems, and the folks at the FTC are very unreasonable if they don’t. don’t take,” Kovacic said.

If Microsoft does offer a significant solution, Chairman Biden would likely want the deal approved and have someone like his antitrust adviser Tim Wu push Khan to accept the proposal, the former FTC chairman said. The idea would be that Microsoft can be trusted to deliver on its promises because of its track record of responsible behavior, sources said.

“It’s getting hard to say, ‘This isn’t good enough,'” said Kovacic, who now puts a 70% chance the merger will be approved. “It becomes more difficult for the Commission to put this aside.”

Doubts about the deal on Wall Street persist. While Microsoft agreed to pay Activision $95 per share in cash, Target’s stock closed Friday at $75.76.

An iPhone with the Microsoft logo.
Microsoft is considered the most Democrat-friendly tech company.
SOPA/LightRocket images via Gett

FTC staff are expected to make a recommendation on the Microsoft deal by mid-December. Microsoft can then meet with individual commissioners to defend its case before the final vote, which could take place later this month, according to sources close to the agency.

“As we’ve said before, we stand ready to address the concerns of regulators, including the FTC, and Sony to ensure the deal closes in confidence,” a Microsoft spokesperson said in a statement. . “We will continue to follow Sony and Tencent in the market after the deal closes, and together Activision and Xbox will benefit gamers and developers and make the industry more competitive.”

An FTC spokesperson did not respond to requests for comment.

The Communications Workers of America wrote in a June 30 letter that they support the deal and are lobbying Congress, an FTC insider noted. CWA said it believes the merger will give Activision Blizzard workers a clear path to collective bargaining and unionization. That’s a message lawmakers, in turn, may be inclined to convey to the FTC, sources said.

“All the commissioners are listening to the Hill,” a DC insider told the Post.

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