Washington, D.C. — In response to news that the Federal Trade Commission has filed an appeal of Judge Corley’s decision denying a preliminary injunction of Microsoft’s $68.7 billion acquisition of Activision-Blizzard, the American Economic Liberties Project released the following statement.

“The Federal Trade Commission is right to appeal Judge Corley’s deeply flawed opinion,” said Lee Hepner, Legal Counsel at the American Economic Liberties Project. “Among other errors, Judge Corley is deviating from the text of federal antitrust laws and applicable precedent that prohibit mergers that ‘may’ — not ‘will’ — substantially lessen competition. That’s a higher bar than Congress intended when it adopted the Clayton Act over a century ago and a potential basis for reversal. This raises serious questions about her interpretation of the law and illustrates why a second opinion is needed.”

Microsoft’s proposed $68.7 billion acquisition of game studio Activision-Blizzard would be the largest merger in the history of Big Tech. In emails presented by the FTC as evidence, Microsoft executives spoke to their desire to build a “moat” around Xbox, and that they are in a “unique position to spend Sony out of business.”

As explained in more detail in an Economic Liberties’ latest Quick Take, Judge Corley ignores this salient evidence and makes a series of errors, including:

• Judge Corley deviates from the text of the Clayton Act and decades of controlling precedent prohibiting mergers that “may substantially lessen competition” – instead adopting a “will probably substantially lessen competition” standard that is a higher bar than the statute allows.
• Judge Corley dismisses extensive evidence proffered by the FTC that, even absent exclusivity, Microsoft has a clear incentive to “partially foreclose” access on competing consoles, including by degrading game functionality.
• Judge Corley dismisses ample evidence that Microsoft has acquired game developers in the past only to quickly convert their games to exclusive Xbox content.
• The FTC introduced bombshell evidence including emails from top Microsoft executives explicitly detailing their monopoly ambitions and intent to “spend Sony out of existence” – and Judge Corley completely ignores it.
• Judge Corley misunderstands the nature of vertical mergers on content platforms, refusing to engage with ample evidence and academic research that differentiated content is not replaceable – and that anticompetitive effects are more pronounced.
• Judge Corley improperly places the burden on the FTC of demonstrating the adequacy of Microsoft’s behavioral remedies (e.g., side agreements with other consoles) in its initial prima facie
• Judge Corley finds that it does not make financial sense for Microsoft to pull Call of Duty from competing consoles, ignoring that Microsoft can afford to take short-term positions that advance their longer-term monopoly ambitions.
• Judge Corley improperly narrows the FTC’s complaint to concerns about Call of Duty, even though the FTC’s complaint includes other Activision-Blizzard AAA games like Diablo and Overwatch. In doing so, she also rubber stamps Microsoft’s side agreements with other consoles as to Call of Duty only, with no analysis of the anticompetitive harm posed by foreclosure to Activision-Blizzard’s many other offerings.

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The American Economic Liberties Project works to ensure America’s system of commerce is structured to advance, rather than undermine, economic liberty, fair commerce, and a secure, inclusive democracy. Economic Liberties believes true economic liberty means entrepreneurs and businesses large and small succeed on the merits of their ideas and hard work; commerce empowers consumers, workers, farmers, and engineers instead of subjecting them to discrimination and abuse from financiers and monopolists; foreign trade arrangements support domestic security and democracy; and wealth is broadly distributed to support equitable political power.