The Stakes Behind the F.T.C.’s Bid to Block Microsoft’s Big Deal

A video-game battle for the ages

The Biden administration yesterday took its boldest step yet in challenging the reach of tech giants when the F.T.C. sued to block Microsoft’s $69 billion takeover of Activision Blizzard.

The move is meant to prevent Microsoft from consolidating power in the video-game industry, but it also represents something bigger. The F.T.C. under Lina Khan wants to rewrite the nation’s antitrust approach to Big Tech and mergers.

The F.T.C. warned about serious blows to competition. Activision, the publisher of hit games like Call of Duty and Candy Crush, has almost 370 million active users each month. Putting it together with Microsoft, which owns the Xbox platform, would run the risk that popular titles would be withheld from rival platforms, according to the agency.

Microsoft has argued that doing so would not make economic sense, and recently agreed to make Call of Duty available to Nintendo for 10 years. (It has extended a similar offer to Sony.) But the F.T.C. is leery of such promises: It cited Microsoft making two titles exclusive to its platforms, despite pledging to European authorities that it had no incentive to do so.

The lawsuit is Microsoft’s biggest challenge in Washington in two decades, when the Justice Department sued the company over its dominance of personal computing. Since then, Microsoft has sought to paint itself as a good corporate citizen, standing with the government on issues like providing A.I. to the Pentagon and arguing against other companies’ closed app ecosystems.

Microsoft pledged to fight this case. “While we believed in giving peace a chance, we have complete confidence in our case and welcome the opportunity to present our case in court,” Brad Smith, its president, said in a statement.

Washington may not be Microsoft’s only battlefield, however. Regulators in both the European Union and Britain have already weighed in on the Activision deal, and may be emboldened by the F.T.C.’s aggressive approach.

It’s the biggest test yet of Ms. Khan’s effort to overhaul antitrust law. In recent decades, courts have tended to approve so-called vertical mergers, like the Activision deal, that unite two related companies in an industry, rather than putting together direct competitors.

But Ms. Khan, the F.T.C.’s chair, has argued that approach ignores the effects of vertical mergers on issues like innovation, particularly as big companies get even bigger. (Also yesterday, opening arguments began in the F.T.C.’s lawsuit seeking to block Meta, the parent company of Facebook, from buying the maker of a virtual-reality fitness app, on similar grounds as the Activision suit.)

Ms. Khan has acknowledged that the strategy may not win in the courts every time. But she has defended filing long-shot lawsuits if they expand the boundaries of competition regulation, including by persuading Congress to change antitrust law.

Still, some critics are unconvinced: “Whatever the agency is doing doesn’t really seem to be rattling big tech, which seems to realize the legal scrutiny is part of the cost of doing business,” writes Jessica Lessin, the founder of the tech news publisher The Information.

HERE’S WHAT’S HAPPENING

Saudi Arabia and China strike a strategic partnership. The agreement, made during the Chinese leader Xi Jinping’s visit to the Middle East, underscores the growing ties between Beijing and Riyadh. Saudi Arabia’s de facto ruler, Crown Prince Mohammed bin Salman, has been especially keen to diversify his country’s allies beyond the United States.

The W.N.B.A. star Brittney Griner lands in the U.S. after a prisoner swap with Russia. Griner, who had been held for 10 months, was released in exchange for the convicted arms dealer Viktor Bout, nicknamed the “Merchant of Death.” White House officials acknowledged that the deal raised the risk of prominent Americans being detained as political prisoners.

The S.E.C. requires more corporate disclosure about crypto risks. The regulator issued a new rule that will force companies to list their cryptocurrency holdings and exposure to developments like FTX’s implosion in public filings. Meanwhile, text messages between crypto executives show their fear about the consequences of FTX’s downfall.

Exxon Mobil plans to spend $50 billion on stock buybacks. The move, which will expand a repurchase program from $30 billion, underscores the oil giant’s focus on channeling profits from high energy prices to shareholders. But it also defies the wishes of President Biden and others that such a windfall should instead be spent on new exploration.

Senator Kyrsten Sinema leaves the Democratic Party. The Arizona lawmaker said this morning that she was registering as an independent, after clashing repeatedly with Democratic leaders on a variety of policies. It appears that she will still caucus with Democrats, helping them retain control of the upper chamber, but she may feel freer to oppose some of their bills.

China’s zero-Covid shift may not reassure global business

China this week lifted many of its pandemic restrictions, easing elements of its zero-Covid policy. But the abruptness of the U-turn, coupled with a resurgence in Covid cases and underlying economic and geopolitical problems, won’t make things any easier for global companies operating in the country. Here’s why.

Covid may be ripping through the population. China is reportedly underplaying the scale of a Covid surge, after suddenly lifting requirements for mass testing and lockdowns. That would mean that normality is a long way off, with the population having little built-in immunity and many older citizens still unvaccinated (or having received domestic vaccines that are less effective than Western ones). “Overall, it’s a good thing that they’re reopening and in such a speedy manner,” said Yanzhong Huang, a health expert at the Council on Foreign Relations. “But the way they handled it is puzzling. They switched from one extreme to another without investing in any preparation efforts.”

The economy is expected to suffer for longer. November was the worst month for Chinese trade since the start of the pandemic, while the property sector, which has accounted for about a quarter of economic output over the past decade, is still lagging. Double-digit economic growth rates that were typical in China are unlikely to come back soon.

The rise in infections also means that factories will probably see higher absenteeism rates and that cautious consumers will be unlikely to resume spending.

“The economic bounce that will happen once the virulence of Covid is spent and people’s confidence returns may not be as sharp,” said George Magnus, the former chief economist at UBS and an associate at Oxford University’s China center.

Beijing is maintaining an iron grip. The sudden shift on Covid, without any mitigating measures, is the latest sign that China’s leader, Xi Jinping, has almost absolute control on the country. Scores of Western companies in China were already reconsidering their operations there, after Mr. Xi elevated ideology and national security above economic growth and the private sector.

And China’s geopolitical fight with the West remains unresolved, so the balancing act for companies operating in both against the backdrop of pressure to “decouple” the economies won’t soon end.

A new New Normal

Back in 2009, Pimco coined the term “New Normal” to describe how the global economy was probably forever changed by the financial crisis. Now the strategist and economist Mohamed El-Erian — then Pimco’s C.E.O. and now the chief economic adviser at Allianz — thinks that a newer mix of geopolitical tension, pandemic and inflation is permanently changing the global economy, again.

He spoke with Times Opinion’s Ezra Klein on this new phase. Here are some takeaways from their conversation.

Don’t expect a return to a prepandemic world. The biggest mistake forecasters are making is to assume the economy will eventually revert to its 2020 state, Mr. El-Erian told Mr. Klein. Instead, the U.S.’s move to shift its supply chain away from China over deepening political tensions, as well as the realities of addressing climate change, will lead to a period of sustained inflation.

The world we inhabit now will be a lot less predictable, he said. That will require more redundancy planning in everyday life and in business, which will result in rising costs, and require a change in mind-set.

“Unless we do that, unless we open to the possibility that we’re living in a much more fluid world, we may end up undershooting on economic, social and institutional objectives that are really important, not just for this generation, but for the future one,” Mr. El-Erian said.

You can listen to the full episode here.

Meet Lance Armstrong, venture capitalist

Yesterday, we told you about a new fund-raising round for Juno, which focuses on providing affordable health care to underserved communities, involving Serena Williams’s firm, Serena Ventures.

But there is a detail in the back story that deserves telling: The deal was co-led by Next Ventures.

If you haven’t heard of Next Ventures, you should. It is led by Lance Armstrong, the former pro cyclist-turned-investor and podcaster. Next Ventures, which he started in 2019, has made more than a dozen investments, including in the fitness tracker Oura Ring and Outside magazine.

Mr. Armstrong got into venture capital when he was still a professional cyclist, as an early limited partner in the firm Lowercase Capital — which in turn made him a very early investor in Uber.

Next Ventures has focused on investments in the health and wellness space. Those now include Juno, which was started by Dr. Akili Hinson. “We have one health care system if you are Black, brown or poor, and then there’s another health system for everyone else,” Dr. Hinson said.

THE SPEED READ

Deals

• How Salesforce’s C.E.O., Marc Benioff, reportedly soured on Slack, even before closing the $28 billion deal to buy the messaging app. (The Information)

• Unilever is reportedly weighing the sale of ice cream brands like Breyers and Klondike — but not Ben & Jerry’s — for around $3 billion (Bloomberg)

• Keurig Dr Pepper will invest $863 million for a 30 percent stake in Nutrabolt, the maker of energy drinks like C4, months after dropping an effort to buy Bang Energy. (Bloomberg)

Policy

• Oil company executives remained privately skeptical of a global shift to renewable energy even as they publicly championed such moves, according to documents obtained by House lawmakers. (WaPo)

• President Biden announced a $36 billion bailout for the pensions of over 350,000 union workers and retirees. (NYT)

• Lawmakers accused Dan Snyder, the owner of the Washington Commanders, of impeding investigations into sexual harassment claims against himself and other team executives. (NYT)

Best of the rest

• Goldman Sachs reportedly plans to cut its bonus pool for partners by up to 50 percent. (Semafor)

• A former top negotiator for Apple on supply-chain issues opened up about his dismissal from the company over his appearance in a TikTok video. (WSJ)

• Western leaders are quietly arguing about how to rebuild Ukraine — and who will have a say. (NYT)

• Big banks aren’t paying Americans much for their money — but savers aren’t switching to higher-interest alternatives. (WSJ)

• “Fuel made from ramen, dishes from coffee grinds: Japan rethinks food waste” (WaPo)

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