If the FTC can pull off a victory in both proceedings — though there’s likely a long way to go before either reaches that point — Khan and his team would do more. That simply blocking these deals would arm itself with broad investigative authority over future acquisitions at Meta and Microsoft. For two tech giants that have built some of their most successful businesses around acquisitions, this would be a radically new regulatory process compared to how they have done business in the past. .
As it stands, current law requires companies to notify the FTC and Justice Department when a deal is valued at more than $101 million, and agencies have a narrow 30-day window to decide whether or not to open an in-depth investigation .
But the FTC could mandate review of their deals and remove any limits on deal size. At the same time, Khan wants to expand the scope of potential deals that can be examined through the process — called “prior approval” in the antitrust world.
In the past, the FTC often included similar audit requirements as standard language in complaints filed in its national court. But the agency has generally limited these additional review requirements to future mergers in markets affected by a particular lawsuit.
Khan wants to revise those limits and give his agency a much broader investigative mandate.
In Microsoft’s case, that means not only that the companies could face the toughest scrutiny in future gaming deals, but also potentially “in business activities and related markets.” The FTC does not define what that means, but given the focus on cloud gaming in the case, it could include, for example, any deal involving Microsoft’s Azure cloud business. The exact scope of a pre-approval requirement will be up to a federal judge.
In fact, just one day after the FTC filed its lawsuit, Microsoft announced the acquisition of Lumenisity, which makes high-speed data cables that “will expand Microsoft’s ability to further optimize its global cloud infrastructure.” The purchase price was not disclosed, but it is the type of deal that could be subject to further scrutiny by the FTC under a prior approval provision.
A Microsoft spokesman declined to comment on the outcome of the FTC case or whether US regulatory approval is currently required for the Lumenisity deal.
The widespread use of pre-approval bypasses the modern merger review process, implemented in the 1970s under the Hart-Scott-Rodino Act, said Bona Law attorney Steve Cernak, whose practice is partially focused on merger reviews. “This is a significant change in the FTC’s process for reviewing transactions.”
Identical language is also used in the FTC v. Meta case. A broad interpretation of “business activity and markets” related to virtual reality applications could include almost any future agreement that the company hopes to enter into.
Spokespeople for Meta and the FTC declined to comment.
None of this should come as a surprise to companies, however, as Khan outlined the plan in a policy statement last year.
However, the FTC is still far from getting what it wants, especially in the Microsoft case, which it has just brought before its internal administrative tribunal. But even if they win, the agency still has to convince a federal judge to block the deal.
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