Video games have been established as a highly preferred entertainment choice for Americans, especially young men.  According to the Pew Research Center, while 43 percent of adults “sometimes or often play video games on a computer, TV, game console or portable device like a cellphone,” that rises to 72 percent for men aged 18-29.  The video game industry has always been extremely competitive and innovative, but the Biden administration is about to play a new game called “Killjoy” over the industry. 

On December 8, 2022, the Federal Trade Commission (FTC), continuing its new practice of interfering in every aspect of the economy, announced the filing of a lawsuit to block Microsoft’s planned acquisition of video game developer Activision.  The proposed acquisition would benefit consumers by providing more access to innovative gaming at lower prices.  The FTC’s action is yet another example of how the agency has abandoned its mission and decades of the antitrust law standard of protecting consumer welfare to pursue an activist agenda.

In the current video game marketplace, Microsoft’s Xbox ranks third in sales behind the Nintendo Switch and Sony’s Playstation 5.  According to Investopedia, Nintendo sold 28 million units of the Nintendo Switch in 2021, Sony sold 13.5 million Playstation 5 consoles, and Microsoft sold nearly 9 million Xbox Series S units.  Nintendo therefore accounts for about 55 percent of sales, Sony accounts for about 27 percent of sales, and Microsoft accounts for about 18 percent of sales.  

To help increase competition with leading video game companies and create a new market that would change the way consumers purchase and access games, Microsoft wants to expand into the mobile gaming industry.  Their proposed acquisition of Activision would help them achieve this goal.  Currently, consumers have to purchase games one at a time and download them onto a single console or device. 

According to Microsoft President Brad Smith, Microsoft would be creating a subscription-based model.  Rather than having to buy games one at a time, consumers would pay monthly or annually for a subscription to Microsoft’s library of games and be able to play them from any device.  The new model would be similar to how Netflix and other streaming services currently operate.  This innovative marketplace would give consumers greater access to games at a lower price than what they currently pay.  It would also benefit game developers who would have their games more accessible to a wider customer base.  

The lawsuit is unfortunately par for the course for FTC Chair Lina Khan, who has expanded the agency beyond its original mission and purpose and taken an openly antagonistic approach toward the tech industry.  Rather than use the consumer welfare standard to guide enforcement action, Chair Khan and her allies in Congress have taken the view that big business is bad business and large acquisitions, like Microsoft’s $69 billion offer to purchase Activision, is ipso facto harmful and detrimental to the economy.  The FTC’s intervention proves that the agency cares little about the consumer welfare standard and would rather pursue Chair Khan’s radical agenda than allow the free market to innovate and create products and services that benefit consumers.  

The video game industry is very competitive with companies that are constantly innovating to gain an advantage.  Microsoft’s proposed acquisition of Activision would make it more competitive by giving consumers greater access to a wider library of games at any time on any device, which will increase choices, lower prices, and provide more widespread access to new games created by more developers.  Rather than allow the market to innovate and compete, the FTC has decided to interfere and block the proposed purchase.  The lawsuit should serve as a wakeup call for lawmakers to ensure the consumer welfare standard is maintained and the FTC returns to its original mission and purpose.