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Rift at FTC fuels hopes for Microsoft’s $69 billion merger with Activision

Rift at FTC fuels hopes for Microsoft's $69 billion merger with Activision
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A disagreement has arisen at the Federal Trade Commission about Microsoft $69 billion deal Acquiring Activision – potentially paving the way for the controversial mega-merger to be approved, The Post has learned.

At least one Democrat on the four-member board has recently been sympathetic to the merger, according to a source close to the situation. That, in turn, could present a difficult path for FTC chairwoman Lina Khan — who insiders say has Microsoft’s deal as her main target as she seeks to brush up on her credentials as Big Tech’s trustbuster.

Sources said Khan – who said publicly in June the agency was Assessing the impact of the deal on workers — was still pushing for the past few weeks to sue to block the merger that 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 “probable,” noting that agency staff were “skeptical of the companies’ arguments.”

The FTC’s sole Republican commissioner, Christine Wilson, has signaled her support for the deal. But sources say at least one of the three Democratic commissioners on the four-member panel — which also includes Khan, Rebecca Slaughter and Alvaro Bedoya — appears to have recently joined the ranks as well Microsoft campaccording to a source close to the situation.

FTC Commissioner Rebecca Slaughter sits at a convention
FTC Commissioner Rebecca Slaughter was counsel for Senate Majority Leader Charles Schumer, and Schumer recently met with Microsoft.
Bloomberg via Getty Images

“Some of the Democrats might feel more comfortable with a deal,” an FTC insider told The Post, approving the deal with business concessions rather than trying to block it altogether.

While the identity of the dissenting Democrat could not be immediately confirmed, post-crisis DC sources pointed to Slaughter, who was acting FTC chairman until last year, when President Joe Biden placed 33-year-old Khan at the helm of the powerful regulator.

A Democratic exit would leave Khan with a 2-2 tie on any vote to oppose the merger – a result that would not only effectively confirm the deal but also challenge Khan’s authority over the agency. Accordingly, that’s a vote that DC insiders say Khan is unlikely to risk.

“Lina probably wouldn’t put things in a position for that to happen, so instead of having that vote, she would be making the motion to approve the settlement,” said William Kovacic, a former FTC chairman. “The way out is to say, ‘We got a lot and we only got it because we were badass.'”

Microsoft has a long 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, according to Open Secrets, there were $4.1 million in Dems and $1 million in Republicans.

Rebecca Slaughter with her young child on a monitor.
Politicians are likely to call commissioners like mother Rebecca Slaughter and pressure them to back the merger.
AP

Senate Majority Leader Chuck Schumer reportedly traveled to Washington state in July to meet Microsoft President Brad Smith and discuss, among other things, the upcoming 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 FTC commissioner.

“At that moment, Schumer calls his old protégé and says, ‘What’s going on?’ to Kovacic.

Meanwhile, reports have surfaced in recent days that Microsoft has signaled its willingness to make significant concessions in order to finalize the deal. Last week, Reuters reported that Microsoft did probably offer a 10-year license agreement for its blockbuster Call of Duty franchise to Playstation owner Sony, citing unnamed sources.

As The Post reported earlier last month, a major sticking point was Microsoft’s stubborn refusal to offer regulators and competitors specific concessions in exchange for winning the deal. If Microsoft finally softens, it will weaken any case for the FTC to block the merger — and encourage dissenters, experts say.

“What makes it difficult is when Microsoft goes to its friends in blue and says, ‘We have provided a package of solutions to all the perceived problems and the folks at the FTC are very unreasonable if they don’t take it.’ said Kovacic.

If Microsoft does offer a significant legal remedy, President Biden would likely want the deal cleared and would ask someone like his antitrust adviser Tim Wu to pressure Khan into accepting the proposal, the former FTC chairman said. The tone would be that Microsoft can be trusted to deliver on its promises because of its history of responsible behavior, sources said.

“It’s going to be hard to say, ‘This isn’t good enough,'” said Kovacic, who now puts the chances of the merger being approved at 70%. “It’s going to be harder for the Commission to push that aside.”

Doubts about the deal on Wall Street remain. While Microsoft has agreed to pay Activision $95 per share in cash, the target company’s stock closed at $75.76 on Friday.

An iPhone with the Microsoft logo.
Microsoft is considered the friendliest tech company to the Democrats.
SOPA Images/LightRocket via Gett

FTC officials are expected to make a recommendation on the Microsoft deal by mid-December. Microsoft can then meet with individual commissioners to advance its case ahead of the final vote, which sources close to the agency say could happen later this month.

“As we have said before, we stand ready to address the concerns of regulators, including the FTC, and Sony to ensure the deal is done with confidence,” a Microsoft spokesman said in a statement. “We will continue to lag behind Sony and Tencent in the market post-deal, and together Activision and Xbox will benefit gamers and developers and make the industry more competitive.”

An FTC spokesman did not respond to requests for comment.

The Communications Workers of America wrote in a June 30 letter that they support the deal and have lobbied 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 lawmakers, in turn, could pass to the FTC, sources said.

“All the commissioners are set on the hill,” a DC insider told the Post.

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