Hit the Reset Button: Video Games, Platforms, and Changing Antitrust Vertical Merger Policy

Authors

• Cahill Maffei

Document Type

Article

Publication Date

12-2023

Journal Title

Transactions: The Tennessee Journal of Business Law

ISSN

4486-1457

DOI

10.70658/4486-1457.1648

Abstract

For decades, antitrust law has treated vertical mergers as almost per se legal. Courts and scholars embraced the economic theories of the Chicago School, which predict that vertical mergers almost always lead to efficiencies that benefit consumers through lower prices. As a result, vertical mergers are almost never challenged and those that are usually fail. More recently, politicians, regulators, and pundits have become increasingly concerned with the growing concentration of wealth and power among America’s large technology corporations. Part of their dominance can be explained by the rapid rise of platform business models, which through network effects can entrench dominant incumbents. Some view antitrust laws as a possible remedy, and stronger vertical merger enforcement among its solutions.

An unlikely culprit—video games—became center stage when the Federal Trade Commission challenged Microsoft’s $68.7 billion acquisition of Call of Duty maker, Activision Blizzard. The merger, if approved by global antitrust regulators, would be the largest ever in the video game industry and would create one of the world’s largest gaming companies. A once fringe leisure activity, video games have become the largest entertainment industry in the world. The industry is undergoing rapid consolidation with console makers—largely Microsoft and Sony—buying up game studios. With a dearth of case law on vertical mergers, the Microsoft-Activision challenge became one of the first where antitrust agencies attempted to hit the reset button on vertical merger policy. Further, as the most studied industry on platform competition, video games provide an excellent way to explore how these types of firms face different incentives post-merger.

This Article explores vertical merger policy in the context of platforms and uses the Microsoft-Activision merger as a case study for future platform vertical merger enforcement. It argues that dominant digital platforms face unique profit incentives that when combined with a vertical merger may make anticompetitive outcomes more likely

First Page

39

Last Page

92

Num Pages

54

Issue Number

1

Publisher

University of Tennessee College of Law

Recommended Citation

Cahill Maffei, Hit the Reset Button: Video Games, Platforms, and Changing Antitrust Vertical Merger Policy, 25 Tenn. J. Bus. L. 39 (2023).
Available at: https://scholarship.law.tamu.edu/student-scholarship/44

FIle Type

PDF