The Post has learned that a row has surfaced in the Federal Trade Commission over Microsoft’s $69 billion deal to acquire Activision — which could pave the way for approval of the controversial mega-merger.
At least one Democratic member of the four-member panel recently took a sympathetic view of the merger, according to a source close to the situation. That, in turn, could create a difficult path for FTC Chair Lena Khan — who, according to insiders, has seen the Microsoft deal as a key target as she looks to burnish her credentials as a trustee of big tech.
Khan — who said publicly in June that the agency was examining the impact of the deal on workers — was still in recent weeks pushing for a lawsuit to block the merger, which would pair Microsoft’s Xbox with Activision’s hit games like Call of Duty, sources said. Duty” and “Candy”. Fan.” Late last month, Politico reported that an FTC lawsuit against the deal was “likely,” noting that agency employees are “skeptical of the companies’ arguments.”
Kristen Wilson, the only Republican commissioner on the FTC, has indicated her support for the deal. But sources say at least one of the three Democratic commissioners on the four-member panel — in addition to Khan that includes Rebecca Slaughter and Alvaro Bedoya — has also recently appeared to lean toward the Microsoft camp, according to a source close to the situation.
“Some Democrats may be more comfortable with compromise,” an FTC insider told The Post, agreeing to the deal with corporate franchises rather than trying to block it outright.
While the opposition Democrat’s identity wasn’t immediately confirmed, D.C. sources after the situation pointed to Slaughter, who served as FTC chairman until last year, when President Joe Biden appointed the 33-year-old Khan at the helm of the powerful regulatory authority. Agency.
The Democratic defection would leave Khan tied 2-2 in any vote to clamp down on the merger — an outcome that would not only effectively approve the deal, but also call Khan’s authority over the agency into question. According to informed sources, Khan is not likely to risk this vote.
“Lena probably won’t put things in a position to let that happen, so instead of getting that vote, she’ll move forward to approve the settlement,” said William Kovacic, former FTC chair. “The way out is to say, ‘We have a lot and we only got it because we were badass. “
Microsoft has a history of courting Democrats. In the 2020 election cycle, Microsoft donated $13.8 million to Democrats and just $1.72 million to Republicans. In 2022, it gave away $4.1 million to Democrats and $1 million to Republicans, according to Open Secrets.
Senate Majority Leader Chuck Schumer in July reportedly went to Washington state to meet with Microsoft President Brad Smith and discuss, among other things, the pending Activision merger and its potential impact on New York. It was also reported that they met in February.
Insiders note that Slaughter was Schumer’s chief advisor from June 2014 to May 2018 before leaving to become a commissioner for the Federal Trade Commission.
That’s when Schumer called his old stepson and said, “What’s up?” According to Kovacic.
Meanwhile, reports have surfaced in recent days that Microsoft has indicated that it is willing to make significant concessions to get the deal done. Last week, Reuters reported that Microsoft may offer a 10-year licensing deal for the massive “Call of Duty” series to PlayStation owner Sony, citing unnamed sources.
As The Post reported early last month, Microsoft’s adamant refusal to make tangible concessions to regulators and competitors in return for winning the deal has been a major sticking point. If Microsoft finally shows it’s willing to budge, that would weaken any case by the Federal Trade Commission to block mergers — and embolden opponents, according to experts.
“What makes it difficult is when Microsoft goes to their friends in the blue and says, ‘We’ve provided a package of solutions to all perceived problems, and the people at the FTC would be very unreasonable if they didn’t take it,'” Kovacic said.
If Microsoft does indeed make a significant remedy, the former FTC chairman said, President Biden will likely want to close the deal and ask someone like his antitrust adviser, Tim Wu, to push Khan to accept the proposal. The idea, the sources said, is that Microsoft can be trusted to keep its promises because of its past history of responsible behavior.
“It becomes difficult to say, ‘This is not good enough,’” said Kovacic, who now estimates the chances of approval of the merger at 70%. “It becomes difficult for the committee to brush this aside.”
Doubts about the deal remain on Wall Street. While Microsoft agreed to pay Activision $95 a share in cash, Target stock closed Friday at $75.76.
FTC staff is expected to provide a recommendation on the Microsoft deal by mid-December. Microsoft could then meet with individual commissioners to press its case before a final vote, which could happen 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 Federal Trade Commission, and Sony to ensure the transaction closes with confidence,” a Microsoft spokesperson said in a statement. “We will continue to track Sony and Tencent in the market after the deal closes, and Activision and Xbox together 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 it supports the deal and is pressing Congress, an FTC insider notes. The CWA said it believes the merger will give Activision Blizzard workers a clear path to collective bargaining and unionization. This is a message that lawmakers, in turn, may be tempted to pass on to the FTC, the sources said.
“All of the commissioners get along with Hill,” a Washington insider told The Post.
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