By Blair Levin & Larry Downes, Harvard Business Review
In the last few months, the U.S. federal government has brought two major antitrust cases: one to block Microsoft’s acquisition of game developer Activision, and another against Google aimed at forcing the company to divest some of its advertising businesses. Along with the Federal Trade Commission’s failed effort to stop Meta’s acquisition of a virtual reality startup, an earlier federal case against Google regarding search, multiple ongoing state-level cases against the company, and reports the FTC will soon bring an action against Amazon, it appears that hunting season for large technology companies is in full swing.
But if reigning in big tech is the goal, antitrust law, at least on the surface, seems a problematic weapon. Antitrust authorities have a poor track record of successful lawsuits that proceed to trial, largely because federal law doesn’t cover the behavior regulators now allege is harmful to competition, including the control of consumer data to create competitive advantages, and self-preferencing their own products on their platforms. But harm not to competitors but to consumers, usually in the form of increased prices, has remained the standard for proving antitrust violations in the courts for roughly the past 40 years.
The regulators know that, of course. But they also recognize that the stars may be aligning to reshape the law dramatically. To navigate increasing uncertainty, companies need to understand the complex politics of competing efforts to craft a new paradigm for competition law. They also need to widen their view of legal risk, and adopt a global plan of action, both for future transactions and for current operations.
How Losing Cases Could Be a Winning Strategy
The government doesn’t necessarily need to win cases for lawsuits to have an impact. For starters, big cases against big companies send a message designed to discourage future dealmaking. This is particularly true for today’s most successful technology companies, which have long expanded into emerging markets by gobbling up promising startups already on the field. As ex-Biden competition advisor Tim Wu recently noted, it can make a huge difference to an industry if the major players know they’re “under heavy surveillance from the government.”
Even if deals eventually close, regulators see value in everyone understanding that all transactions will be more closely scrutinized. From the outset, companies will find themselves encouraged to make voluntary concessions. In the Activision deal, for example, Microsoft preemptively offered substantial limits on how it will treat Activision’s products post-merger. Flagship titles including Call of Duty, notably, will not be pulled from other platforms, and offered instead as Xbox exclusives.
More broadly, an aggressive, if unsuccessful, litigation strategy can provide a potent disruption to companies deemed too powerful. Cases can take years to resolve. In the interim, senior management may be distracted by spending their time dealing with the lawyers instead of the business. Those enterprises may also second guess current plans, worried that new initiatives will inflame existing lawsuits or weaken their negotiating positions. In the past, IBM, AT&T, Intel, and Microsoft were famously flummoxed for years by antitrust cases that dragged on, much as Google and Meta are today — and perhaps, now, Microsoft again.
