The US government is taking action against Microsoft again

Published on January 12, 2023


through Benjamin Seevers.

Once again, after two decades of silence, the Federal Trade Commission (FTC) is attacking Microsoft. Why? Microsoft has been accused of monopolistic tendencies in its latest bid to acquire Activision Blizzard.

The irony of the FTC’s move is that Microsoft’s acquisition of Activision won’t even give it a majority market share in the industry. In 2020, Microsoft’s share of the video game market was 6.5%. By acquiring Activision Blizzard, Microsoft will reach 10.7%. We are far from a majority market share and far from a 100% total monopoly.

The definition of monopoly power is very broad. A good is said to have monopoly power, any element that distinguishes it from another. Therefore, every market player is a “monopolist” to some extent. This is not a useful definition of the term.

What does the FTC mean when it uses this term?

In their own words: “(The) Xbox maker (Microsoft) will gain control of major video game franchises, allowing it to hurt competition in high-performance gaming consoles and subscription services.”

The FTC publicly accuses Microsoft of trying to obtain monopoly status in “multiple markets.” However, Microsoft is unlikely to exceed 10% market share in the gaming industry, the relevant market for this discussion. But if you read headlines like “Microsoft to acquire Activision in $69 billion metaverse bet” or “Netflix next on Microsoft’s shopping list,” you realize that Microsoft is a giant, greedy leviathan that selfishly and recklessly devours small businesses. strive to be the fattest person in the room. In short, the antitrust crusaders would have you believe that this deal would make Microsoft too big.

Of course, the FTC will block the deal, ignoring Microsoft’s 2021 acquisition of Bethesda. Special interests are at stake, including PlayStation maker Sony. At stake here is the Activision property franchise call of dutySony court documents say it has a rival in the franchise The battlefield from the not-so-popular Electronic Arts.

In the free market, Sony might be encouraged to buy franchises The battlefield Establishing a closer relationship with EA to provide EA or better alternatives call of duty ; however, Sony chose to use the government to force Microsoft to back out of the purchase or at least compromise. Sony’s desire for intimacy can be completely dismissed.

On the other hand, all this talk of size and monopoly obscures the benefit of Microsoft buying Activision. Basically, this agreement aims to improve the welfare of consumers and not aggravate their disadvantages.

To explore this point further, consider the concept of consumer sovereignty. Whether the entrepreneur makes a profit or a loss ultimately depends on the choice of consumers. Entrepreneurs are in a constant struggle to try to better meet the demands of consumers. Microsoft is no different.

Microsoft would not have made this purchase if it did not expect it to increase its profits. The increase in profits in a free market can only be attributed to the better satisfaction of consumers’ desires. Microsoft is looking to buy Activision’s assets and arbitrage them over time, increasing consumer satisfaction and increasing value for money.

If Microsoft gets it wrong, there will be losses. At this point, Microsoft may decide to take a different approach: perhaps agreeing to sit down with Sony for the rights to certain Activision properties.

Microsoft is now forced to compromise to get regulatory approval. This would violate the purchase agreement and ultimately harm the consumers.

In matters of monopoly, we have only to deal with the privileges of the state. Murray Rothbard put it this way:

“Monopoly is the granting of special privileges by the state, preserving a certain area of ​​production for a certain person or group. Access to this area by others is prohibited and this prohibition is enforced by the state police. »

As long as there are no legal barriers to new competition, the market remains free and competitive. If Microsoft fails miserably, there are always potential competitors already present and ready to take advantage of the opportunity. Microsoft may have its share of legal monopolies in the form of patents, but efforts should be focused on dismantling the various intellectual monopolies held by both it and its competitors. Instead, public outrage has focused on preventing mergers, even if they are beneficial, not harmful, to consumers.

Microsoft is preparing to fight the FTC’s order. Rarely does a large corporation take up the cause of the free market, even temporarily. We must wish him success.

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