U.S. Circuit Judge Jennifer Sung made the comment December 6 during oral argument in the Federal Trade Commission’s ongoing effort to block Microsoft’s $69 billion purchase of Activision Blizzard, the biggest U.S. maker of video games. (Hat tip to Josh Sisco at Politico Pro.) The FTC claimed that the merger threatened to substantially reduce competition, lost after a bench trial, and sought reversal by the Ninth Circuit. The deal closed in October.
“Competition, not competitors”
Judge Sung’s remark caught my eye because it inverts a mantra you often see in court opinions rejecting antitrust claims: that antitrust law protects “competition, not competitors.”
To a normal person, “competition, not competitors” implies that harm to a species of plaintiffs–competitors–doesn’t matter for purposes of the Sherman Act (and the other antitrust laws) and that only damage to competition counts. But in fact conduct that hurts a competitor might also reduce competition (and therefore violate the Sherman Act) if (for example) a cartel or a dominant firm used “anticompetitive” means to discipline, weaken, or destroy a rival.
Paraphrasing Judge Sung, you can’t equate harm to some competitors to an anti-competitive effect. You still need proof that the injury to competitors also injured the competitive process itself.
Yet the “competition, not competitors” mantra unfairly devalues antitrust claims when a competitor brings them. It suggests to competitors, inaccurately, that antitrust laws just don’t protect them, sorry!
It also complements the emphasis that the “consumer welfare” approach to antitrust law places on remedying and preventing harm to consumers. In the consumer welfare world, the market quickly corrects abuses against competitors, and protecting “competition, not competitors” begins to sound more like protecting “competition only for consumers, not competitors.”
“The competitive process”
Judge Sung’s turn of phrase provides a welcome corrective. Just because Microsoft promised it would give more goodies to some video game buyers if the deal went through, she said, that doesn’t mean the merger would have a positive effect on competition. Microsoft still must prove that providing the benefits to some consumers will also enhance the competitive process itself in a lasting way.
Without a showing of improvements to competition, in fact, Microsoft’s beneficence to some gamers looks more like a conflation of a temporary, tactical surrender of some of the profits it expected the merger to yield with durable, competition-enhancing changes to market structure.
A better phrasing would say simply that antitrust law protects “the competitive process”. Judge Sung has shown the way.