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This is the boldest move the Biden administration has taken to police mergers, says fmr. FTC chairman

The Federal Trade Commission said on Thursday it has filed an antitrust case against Microsoft to challenge the software maker’s attempt to acquire video game publisher Activision Blizzard, claiming it would violate U.S. law.

This isn’t Microsoft’s first time dealing with competitive pressure. In 1998 the U.S. Justice Department filed a broad antitrust case against the company. Microsoft changed some practices related to its Windows operating system business as a result. Regulators in the United Kingdom are looking into whether the Activision Blizzard acquisition would lessen competition in the country.

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Microsoft announced plans to acquire Activision Blizzard for $68.7 billion in January, with the goal of closing it by June 2023. The deal has come under pressure from Microsoft’s competitors in gaming, such as Sony. Microsoft has repeatedly said it won’t be the world’s leader in gaming if the deal were to close, and it has vowed to provide popular “Call of Duty” games on gaming platforms other than those owned by Microsoft.

“We continue to believe that this deal will expand competition and create more opportunities for gamers and game developers,” Brad Smith, Microsoft’s vice chair and president, said in a statement. “We have been committed since Day One to addressing competitive concerns, including by offering earlier this week proposed concessions to the FTC. While we believed in giving peace a chance, we have complete confidence in our case and welcome the opportunity to present our case in court.”

FTC commissioners voted 3-1 to move forward with the agency’s administrative complaint, which will go before the FTC’s internal administrative law judge. In that process, the ALJ makes an initial decision after a trial-like proceeding. The respondent or FTC staff serving as “complaint counsel” can choose to appeal the initial decision to the full commission for a vote. After that, the respondent could still ask a federal appeals court to review the commission’s order.

“With control of Activision’s content, Microsoft would have the ability and increased incentive to withhold or degrade Activision’s content in ways that substantially lessen competition — including competition on product quality, price, and innovation,” the FTC said in its complaint. “This loss of competition would likely result in significant harm to consumers in multiple markets at a pivotal time for the industry.”

FTC sues Microsoft over proposed Activision deal

In the statement, the FTC said Microsoft has a record, including with its 2021 ZeniMax deal, of buying games and using the moves to suppress competition from other companies that make consoles. Microsoft promised the European Commission antitrust officials that the company wouldn’t have an incentive to stop people from playin ZeniMax games on consoles other than the Xbox, but after the European Commission permitted the deal to proceed, Microsoft announced that it was making ZeniMax games such as Elder Scrolls VI, Redfall and Starfield into exclusives, the FTC said in its suit.

The FTC said Activision Blizzard has brought its games to a variety of devices, irrespective of their manufacturers, but that might change if Microsoft were to complete the deal. Microsoft could adjust prices or worsen the experience on competing hardware such as Sony PlayStation consoles, or keep Activision Blizzard consoles from reaching consoles other than Microsoft Xbox systems, the agency said.

Microsoft does offer titles that are exclusive to the Xbox, and in October Phil Spencer, CEO of gaming at Microsoft, pointed out that Sony has its own set of exclusive franchises, but over time Microsoft has brought games such as Minecraft to other devices. He argued that it’s important for more people, not less, to play games the company owns.

Microsoft is seeking to add subscribers to its Game Pass service that provides access to hundreds of games. The Game Pass Ultimate subscription tier also allows people to play games that stream from Microsoft data centers on a variety of devices, including smartphones.

The FTC said in its case that the proposed acquisition is reasonably likely to reduce competition or bring about monopolies in the markets for gaming subscription services, cloud gaming and high-performance consoles.

“We want Call of Duty to be enjoyed by more players around the world. That requires COD being on diverse platforms after the merger of Microsoft + Activision Blizzard,” Lulu Cheng Meservey, Activision’s executive vice president for corporate affairs and communications chief, said in a tweet.

The lawsuit represents a major milestone for FTC Chair Lina Khan, who has long signaled aggressive action on tech. While her tenure has included a lawsuit seeking to block Facebook owner Meta from acquiring a virtual reality fitness app developer, the lawsuit seeking to block the Microsoft-Activision deal is notable for its scale, as the largest technology transaction to date.

Khan and her counterpart at the Justice Department’s antitrust division, Jonathan Kanter, have said they want the agencies to become more comfortable with taking big swings, adding that a high win record in court likely means they aren’t challenging enough cases.

Federal enforcers have seen a string of losses in merger challenges in recent months, with the exception of one significant win by the Department of Justice in its case against Penguin Random House’s proposed acquisition of Simon & Schuster.

The FTC’s administrative law judge rejected the commission’s challenge of Illumina’s proposed acquisition of Grail in the biotech space, though the FTC said it will appeal that ruling. The Antitrust Division has also said it’s appealing or considering appealing the three merger cases it lost so far: UnitedHealth Group-Change Healthcare, US Sugar-Imperial Sugar and Booz Allen Hamilton-EverWatch.

Smith previewed Microsoft’s arguments against blocking the deal in a Wall Street Journal opinion piece published earlier this week, saying it would be a “huge mistake.”

“Microsoft faces huge challenges in the gaming industry,” Smith wrote, adding that its Xbox console gaming system is in third place behind Sony’s PlayStation and the Nintendo Switch. Microsoft also has “no meaningful presence in the mobile game industry,” he said. He pointed attention toward Apple and Google, saying that while mobile gaming is a fast growing and high revenue segment, those two app store operators take a “significant portion” of those earnings through their fees on developers.

Activision Blizzard does have a place on mobile devices thanks to its 2016 acquisition of King, which publishes the Candy Crush Saga game. The Candy Crush franchise has over 200 million monthly active users, Activision Blizzard said in November.

Smith noted that Microsoft’s purchase of Activision would let it compete effectively in the gaming industry, spurring innovation and helping customers. He downplayed concerns voiced by competitors such as Sony, saying the company is “as excited about this deal as Blockbuster was about the rise of Netflix.”

Activision Blizzard shares reached a session low of $73 per share after the FTC announced its case. Microsoft had agreed to pay $95 per share.

Bobby Kotick, Activision Blizzard’s CEO, told employees in a memo that the assertion that the deal is anti-competitive doesn’t match with the facts.

“Simply put, a combined Microsoft-ABK will be good for players, good for employees, good for competition and good for the industry,” he wrote. “Our players want choice, and this gives them exactly that.”

Politico reported last month that the FTC was likely to try to block the deal.

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How Elon Musk’s plan to slash government agencies and regulation may benefit his empire

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How Elon Musk’s plan to slash government agencies and regulation may benefit his empire

Elon Musk’s business empire is sprawling. It includes electric vehicle maker Tesla, social media company X, artificial intelligence startup xAI, computer interface company Neuralink, tunneling venture Boring Company and aerospace firm SpaceX. 

Some of his ventures already benefit tremendously from federal contracts. SpaceX has received more than $19 billion from contracts with the federal government, according to research from FedScout. Under a second Trump presidency, more lucrative contracts could come its way. SpaceX is on track to take in billions of dollars annually from prime contracts with the federal government for years to come, according to FedScout CEO Geoff Orazem.

Musk, who has frequently blamed the government for stifling innovation, could also push for less regulation of his businesses. Earlier this month, Musk and former Republican presidential candidate Vivek Ramaswamy were tapped by Trump to lead a government efficiency group called the Department of Government Efficiency, or DOGE.

In a recent commentary piece in the Wall Street Journal, Musk and Ramaswamy wrote that DOGE will “pursue three major kinds of reform: regulatory rescissions, administrative reductions and cost savings.” They went on to say that many existing federal regulations were never passed by Congress and should therefore be nullified, which President-elect Trump could accomplish through executive action. Musk and Ramaswamy also championed the large-scale auditing of agencies, calling out the Pentagon for failing its seventh consecutive audit. 

“The number one way Elon Musk and his companies would benefit from a Trump administration is through deregulation and defanging, you know, giving fewer resources to federal agencies tasked with oversight of him and his businesses,” says CNBC technology reporter Lora Kolodny.

To learn how else Elon Musk and his companies may benefit from having the ear of the president-elect watch the video.

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Why X’s new terms of service are driving some users to leave Elon Musk’s platform

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Why X's new terms of service are driving some users to leave Elon Musk's platform

Elon Musk attends the America First Policy Institute gala at Mar-A-Lago in Palm Beach, Florida, Nov. 14, 2024.

Carlos Barria | Reuters

X’s new terms of service, which took effect Nov. 15, are driving some users off Elon Musk’s microblogging platform. 

The new terms include expansive permissions requiring users to allow the company to use their data to train X’s artificial intelligence models while also making users liable for as much as $15,000 in damages if they use the platform too much. 

The terms are prompting some longtime users of the service, both celebrities and everyday people, to post that they are taking their content to other platforms. 

“With the recent and upcoming changes to the terms of service — and the return of volatile figures — I find myself at a crossroads, facing a direction I can no longer fully support,” actress Gabrielle Union posted on X the same day the new terms took effect, while announcing she would be leaving the platform.

“I’m going to start winding down my Twitter account,” a user with the handle @mplsFietser said in a post. “The changes to the terms of service are the final nail in the coffin for me.”

It’s unclear just how many users have left X due specifically to the company’s new terms of service, but since the start of November, many social media users have flocked to Bluesky, a microblogging startup whose origins stem from Twitter, the former name for X. Some users with new Bluesky accounts have posted that they moved to the service due to Musk and his support for President-elect Donald Trump.

Bluesky’s U.S. mobile app downloads have skyrocketed 651% since the start of November, according to estimates from Sensor Tower. In the same period, X and Meta’s Threads are up 20% and 42%, respectively. 

X and Threads have much larger monthly user bases. Although Musk said in May that X has 600 million monthly users, market intelligence firm Sensor Tower estimates X had 318 million monthly users as of October. That same month, Meta said Threads had nearly 275 million monthly users. Bluesky told CNBC on Thursday it had reached 21 million total users this week.

Here are some of the noteworthy changes in X’s new service terms and how they compare with those of rivals Bluesky and Threads.

Artificial intelligence training

X has come under heightened scrutiny because of its new terms, which say that any content on the service can be used royalty-free to train the company’s artificial intelligence large language models, including its Grok chatbot.

“You agree that this license includes the right for us to (i) provide, promote, and improve the Services, including, for example, for use with and training of our machine learning and artificial intelligence models, whether generative or another type,” X’s terms say.

Additionally, any “user interactions, inputs and results” shared with Grok can be used for what it calls “training and fine-tuning purposes,” according to the Grok section of the X app and website. This specific function, though, can be turned off manually. 

X’s terms do not specify whether users’ private messages can be used to train its AI models, and the company did not respond to a request for comment.

“You should only provide Content that you are comfortable sharing with others,” read a portion of X’s terms of service agreement.

Though X’s new terms may be expansive, Meta’s policies aren’t that different. 

The maker of Threads uses “information shared on Meta’s Products and services” to get its training data, according to the company’s Privacy Center. This includes “posts or photos and their captions.” There is also no direct way for users outside of the European Union to opt out of Meta’s AI training. Meta keeps training data “for as long as we need it on a case-by-case basis to ensure an AI model is operating appropriately, safely and efficiently,” according to its Privacy Center. 

Under Meta’s policy, private messages with friends or family aren’t used to train AI unless one of the users in a chat chooses to share it with the models, which can include Meta AI and AI Studio.

Bluesky, which has seen a user growth surge since Election Day, doesn’t do any generative AI training. 

“We do not use any of your content to train generative AI, and have no intention of doing so,” Bluesky said in a post on its platform Friday, confirming the same to CNBC as well.

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The Pentagon’s battle inside the U.S. for control of a new Cyber Force

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The Pentagon's battle inside the U.S. for control of a new Cyber Force

A recent Chinese cyber-espionage attack inside the nation’s major telecom networks that may have reached as high as the communications of President-elect Donald Trump and Vice President-elect J.D. Vance was designated this week by one U.S. senator as “far and away the most serious telecom hack in our history.”

The U.S. has yet to figure out the full scope of what China accomplished, and whether or not its spies are still inside U.S. communication networks.

“The barn door is still wide open, or mostly open,” Senator Mark Warner of Virginia and chairman of the Senate Intelligence Committee told the New York Times on Thursday.

The revelations highlight the rising cyberthreats tied to geopolitics and nation-state actor rivals of the U.S., but inside the federal government, there’s disagreement on how to fight back, with some advocates calling for the creation of an independent federal U.S. Cyber Force. In September, the Department of Defense formally appealed to Congress, urging lawmakers to reject that approach.

Among one of the most prominent voices advocating for the new branch is the Foundation for Defense of Democracies, a national security think tank, but the issue extends far beyond any single group. In June, defense committees in both the House and Senate approved measures calling for independent evaluations of the feasibility to create a separate cyber branch, as part of the annual defense policy deliberations.

Drawing on insights from more than 75 active-duty and retired military officers experienced in cyber operations, the FDD’s 40-page report highlights what it says are chronic structural issues within the U.S. Cyber Command (CYBERCOM), including fragmented recruitment and training practices across the Army, Navy, Air Force, and Marines.

“America’s cyber force generation system is clearly broken,” the FDD wrote, citing comments made in 2023 by then-leader of U.S. Cyber Command, Army General Paul Nakasone, who took over the role in 2018 and described current U.S. military cyber organization as unsustainable: “All options are on the table, except the status quo,” Nakasone had said.

Concern with Congress and a changing White House

The FDD analysis points to “deep concerns” that have existed within Congress for a decade — among members of both parties — about the military being able to staff up to successfully defend cyberspace. Talent shortages, inconsistent training, and misaligned missions, are undermining CYBERCOM’s capacity to respond effectively to complex cyber threats, it says. Creating a dedicated branch, proponents argue, would better position the U.S. in cyberspace. The Pentagon, however, warns that such a move could disrupt coordination, increase fragmentation, and ultimately weaken U.S. cyber readiness.

As the Pentagon doubles down on its resistance to establishment of a separate U.S. Cyber Force, the incoming Trump administration could play a significant role in shaping whether America leans toward a centralized cyber strategy or reinforces the current integrated framework that emphasizes cross-branch coordination.

Known for his assertive national security measures, Trump’s 2018 National Cyber Strategy emphasized embedding cyber capabilities across all elements of national power and focusing on cross-departmental coordination and public-private partnerships rather than creating a standalone cyber entity. At that time, the Trump’s administration emphasized centralizing civilian cybersecurity efforts under the Department of Homeland Security while tasking the Department of Defense with addressing more complex, defense-specific cyber threats. Trump’s pick for Secretary of Homeland Security, South Dakota Governor Kristi Noem, has talked up her, and her state’s, focus on cybersecurity.

Former Trump officials believe that a second Trump administration will take an aggressive stance on national security, fill gaps at the Energy Department, and reduce regulatory burdens on the private sector. They anticipate a stronger focus on offensive cyber operations, tailored threat vulnerability protection, and greater coordination between state and local governments. Changes will be coming at the top of the Cybersecurity and Infrastructure Security Agency, which was created during Trump’s first term and where current director Jen Easterly has announced she will leave once Trump is inaugurated.

Cyber Command 2.0 and the U.S. military

John Cohen, executive director of the Program for Countering Hybrid Threats at the Center for Internet Security, is among those who share the Pentagon’s concerns. “We can no longer afford to operate in stovepipes,” Cohen said, warning that a separate cyber branch could worsen existing silos and further isolate cyber operations from other critical military efforts.

Cohen emphasized that adversaries like China and Russia employ cyber tactics as part of broader, integrated strategies that include economic, physical, and psychological components. To counter such threats, he argued, the U.S. needs a cohesive approach across its military branches. “Confronting that requires our military to adapt to the changing battlespace in a consistent way,” he said.

In 2018, CYBERCOM certified its Cyber Mission Force teams as fully staffed, but concerns have been expressed by the FDD and others that personnel were shifted between teams to meet staffing goals — a move they say masked deeper structural problems. Nakasone has called for a CYBERCOM 2.0, saying in comments early this year “How do we think about training differently? How do we think about personnel differently?” and adding that a major issue has been the approach to military staffing within the command.

Austin Berglas, a former head of the FBI’s cyber program in New York who worked on consolidation efforts inside the Bureau, believes a separate cyber force could enhance U.S. capabilities by centralizing resources and priorities. “When I first took over the [FBI] cyber program … the assets were scattered,” said Berglas, who is now the global head of professional services at supply chain cyber defense company BlueVoyant. Centralization brought focus and efficiency to the FBI’s cyber efforts, he said, and it’s a model he believes would benefit the military’s cyber efforts as well. “Cyber is a different beast,” Berglas said, emphasizing the need for specialized training, advancement, and resource allocation that isn’t diluted by competing military priorities.

Berglas also pointed to the ongoing “cyber arms race” with adversaries like China, Russia, Iran, and North Korea. He warned that without a dedicated force, the U.S. risks falling behind as these nations expand their offensive cyber capabilities and exploit vulnerabilities across critical infrastructure.

Nakasone said in his comments earlier this year that a lot has changed since 2013 when U.S. Cyber Command began building out its Cyber Mission Force to combat issues like counterterrorism and financial cybercrime coming from Iran. “Completely different world in which we live in today,” he said, citing the threats from China and Russia.

Brandon Wales, a former executive director of the CISA, said there is the need to bolster U.S. cyber capabilities, but he cautions against major structural changes during a period of heightened global threats.

“A reorganization of this scale is obviously going to be disruptive and will take time,” said Wales, who is now vice president of cybersecurity strategy at SentinelOne.

He cited China’s preparations for a potential conflict over Taiwan as a reason the U.S. military needs to maintain readiness. Rather than creating a new branch, Wales supports initiatives like Cyber Command 2.0 and its aim to enhance coordination and capabilities within the existing structure. “Large reorganizations should always be the last resort because of how disruptive they are,” he said.

Wales says it’s important to ensure any structural changes do not undermine integration across military branches and recognize that coordination across existing branches is critical to addressing the complex, multidomain threats posed by U.S. adversaries. “You should not always assume that centralization solves all of your problems,” he said. “We need to enhance our capabilities, both defensively and offensively. This isn’t about one solution; it’s about ensuring we can quickly see, stop, disrupt, and prevent threats from hitting our critical infrastructure and systems,” he added.

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