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 get approved, The Post has learned.
At least one Democrat on the four-member panel has recently taken 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 Lina Khan — who according to insiders has eyed Microsoft’s deal as a major target as she looks to burnish her credentials as a trustbuster of Big Tech.
Sources said Khan — who said publicly in June the agency was scrutinizing the deal’s impact on workers — was in recent weeks still pushing to sue to block the merger, which would pair Microsoft’s Xbox with hit Activision games like “Call of Duty” and “Candy Crush.” Late last month, Politico reported that an FTC lawsuit against the deal was “likely,” noting that the agency’s staff are “skeptical of the companies’ arguments.”
The FTC’s sole Republican commissioner, Christine Wilson, has signaled support of the deal. But sources say at least one of the four-member panel’s three Democratic commissioners — which in addition to Khan include Rebecca Slaughter and Alvaro Bedoya — also has recently appeared to lean toward the Microsoft camp, according to a source close to the situation.
“Some of the Democrats might be more comfortable with a settlement,” approving the deal with concessions from the companies instead of trying to block it altogether, an FTC insider told The Post.
While the identity of the dissenting Democrat couldn’t immediately be confirmed, DC sources following the situation pointed to Slaughter, who was acting FTC Chair until last year, when President Joe Biden installed 33-year-old Khan at the helm of the powerful regulatory agency.
A Democratic defection would leave Khan with a 2-2 tie in any vote to clamp down on the merger — a result that would not only effectively OK the deal but also throw Khan’s authority over the agency into question. That, accordingly, is a vote that Khan isn’t likely to risk, according to DC insiders.
“Lina would probably not put things in a position for that to take place, so instead of having that vote she would make the motion to approve the settlement,” said William Kovacic, a former FTC Chairman. “The way out is to say, ‘We got a great deal and only got it because we’ve been badasses.’”
Microsoft has a history of courting Democrats. In the 2020 election cycle, Microsoft donated $13.8 million to Democrats and only $1.72 million to Republicans. In 2022, it gave $4.1 million to Dems and $1 million to Republicans, according to Open Secrets.
Senate Majority Leader Chuck Schumer in July reportedly went to Washington state to meet Microsoft President Brad Smith and discuss, among other things, the pending Activision merger and its potential impact on New York. They also reportedly met in February.
Insiders note that Slaughter was Schumer’s chief counsel from June 2014 to May 2018 before leaving to become an FTC Commissioner.
“This is when Schumer calls his old protege and says, ‘What’s up?” according to Kovacic.
Meanwhile, reports surfaced in recent days that Microsoft has signaled it’s willing to make significant concessions to get the deal done. Last week, Reuters reported that Microsoft was likely to offer a 10-year licensing deal for its blockbuster “Call of Duty” franchise to Playstation owner Sony, citing unnamed sources.
As reported by The Post early last month, Microsoft’s stubborn refusal to offer concrete concessions to regulators and rivals in exchange for winning the deal has been a major sticking point. If Microsoft is finally showing a willingness to budge, that weakens any case by the FTC to block the merger — and emboldens dissenters, according to experts.
“What makes it difficult is when Microsoft goes to their friends in blue and says, ‘We have provided a package of solutions for all the perceived problems, and the folks at the FTC are being very unreasonable if they don’t take it,’” Kovacic said.
If Microsoft does indeed offer a significant remedy, President Biden would likely want the deal cleared and ask someone such as his antitrust advisor Tim Wu to push Khan to accept the proposal, the ex-FTC chairman said. The pitch would be that Microsoft can be trusted to keep its promises because of its past history of responsible behavior, sources said.
“It does become hard to say, ‘This is not good enough,’” said Kovacic, who now puts the chances of the merger getting approved at 70%. “It becomes more difficult for the Commission to push this aside.”
Doubts about the deal on Wall Street persist. While Microsoft has agreed to pay Activision $95 a share in cash, the target’s stock closed on Friday at $75.76.
FTC staff is expected to make a recommendation on the Microsoft deal by mid-December. Microsoft can then meet with individual commissioners to press its case before the final vote, which could happen later this month, according to sources close to the agency.
“As we have said before, we are prepared to address the concerns of regulators, including the FTC, and Sony to ensure the deal closes with confidence,” a Microsoft spokesman said in a statement. “We’ll still trail 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 didn’t respond to requests for comment.
The Communications Workers of America wrote in a June 30 letter that it supported the deal and has been lobbying Congress, an FTC insider noted. CWA said it believes the merger would give Activision Blizzard workers a clear path to collective bargaining and unionization. That’s a message that lawmakers, in turn, may be inclined to pass to the FTC, sources said.
“All the Commissioners are attuned to the Hill,” one DC insider told The Post.