Playing Games at the FTC
 
Amidst everything going on right now, including one of the largest fraud cases in history in the FTX scandal, the Federal Trade Commission (FTC) has decided to dedicate its time and energy to push the boundaries of US antitrust law, and thus its own power to micromanage the economy. The latest installment in this trend comes in the form of a complaint filed by the Commission to challenge the recent $68.7 billion acquisition of video game studio Activision Blizzard by Microsoft. This complaint reveals yet again that the FTC has lost sight of the ball of consumer protection in favor of its flawed theory of antitrust.  First, it is important to understand the mechanics of the FTC’s complaint. The FTC has not yet sued to officially block the deal, though that is certainly their end game. According to the Commission, it “issues an administrative complaint when it has ‘reason to believe’ the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest.” This is just a first step in what will ultimately turn out to be a full-fledged attempt to block the merger. Because of the inefficient nature of bureaucracies like the FTC, and the typical length this process takes once an administrative complaint is filed, the process may not conclude until mid-2024. Meanwhile, nothing is stopping the acquisition from going forward, but were the FTC to succeed at the end, Microsoft would have to undergo an expensive process to un-merge Activision Blizzard from its company.
 
Because of this, Microsoft may very well choose to wait before finalizing the deal. This is not accidental on the FTC’s part. Because of the drawn-out process, the FTC has essentially found a way to force Microsoft into a decision between delaying an innovative deal that will create value for their customers and potentially setting themselves up for a very costly process. In this way, the FTC is de facto stopping the acquisition before an administrative law judge has even determined that the Commission has standing to bring a suit. Beyond this shameless bureaucratic obstruction, the FTC’s legal theory of the case is severely flawed. The Commission’s case rests on the premise that Microsoft – which controls Xbox – could withhold Activision’s content (which includes the Call of Duty franchise) from console competitors like Sony’s Playstation. Their theory is purely vertical and they concede there is no risk of diminished competition between gaming titles themselves.
 
This argument overstates Activision’s importance in the gaming world. For sure, Activision is a major player and 10 of the top 15 selling console games from last decade were Call of Duty titles. However, in terms of revenue, Microsoft and Activision Blizzard are the fourth and sixth largest major game publishers respectively. The combined entity would be roughly even with Sony Interactive Entertainment, meaning it is no sure thing that Microsoft/Activision would even be the biggest player in the industry, let alone an anti-competitive monopolistic force. Some estimates put the combined firms at third, behind Sony and China’s Tencent. The FTC is also overlooking the fact that Microsoft has already publicly promised competitors access to the Call of Duty series for at minimum the next ten years. They also told Sony that the game could continue to be offered on Sony’s subscription service, Playstation Plus. The company is making clear overtures to demonstrate that this is not a hostile move and is trying to show good will towards its competitors. These overtures seem lost on the FTC. Beyond that, Microsoft is under no obligation to even make these offers in the first place. In almost no line of business is a company expected to allow its competitors to sell its products. This would be akin to demanding Starbucks allow Dunkin' Donuts to make a profit selling its coffee and lattes. This has been clearly understood in the gaming industry and is the reason why Sony does not allow its popular God of War series to be played on Microsoft’s Xbox in any capacity. Platform-exclusive titles have been a hallmark of the industry for some time; Mario on Nintendo, Halo on Xbox, etc. There’s no novel practice being floated by FTC here.
 
This merger – like so many others – offers companies like Microsoft the ability to offer innovative services for their customers. This deal is set to increase Microsoft’s presence in the mobile gaming industry, where it’s previously been virtually absent. Microsoft also wants to create a cloud gaming service, which allows customers to stream games on a number of different devices, rather than being confined to a console or mobile phone. To do that, they need a robust suite of content. The Activision acquisition allows them to do that and thus enhances competition in these relevant markets. While the FTC may only see a big company getting bigger, gamers and industry experts can see the potential for innovation and greater competition. Rather than being an aberration, acquisitions like this represent the proper functioning of the market to advance the industry beyond its current capabilities. Competitors will likely respond in kind with innovations of their own. This is the beauty of the free market and the FTC needs to step back, let it happen, and get back to their core mission of protecting consumers from fraud, not innovation.
 
Gene Therapy Revolution
 
Many people may not realize that the Food and Drug Administration (FDA) is on the frontline of healthcare and potentially saving countless lives and billions of dollars for consumers and taxpayers. Decades of scientific research paid off in spectacular fashion recently when the FDA approved a gene therapy called Hemgenix designed to help treat adults with Hemophilia B. Sufferers of this deadly disease cannot produce a pivotal blood-clotting protein, leading to frequent spontaneous bleeding episodes, swelling, bruising, and childbirth complications.  Up until now, patients have had to make do with intravenous infusions to enable clotting. But, thanks to Hemgenix, patients will be able to keep bleeding at bay via a one-time infusion. While the FDA should be lauded for its far-sighted approval, the agency should ensure that promising, future therapies are also given the green-light. Millions of lives could be saved with sensible regulatory reforms. Gene therapies such as Hemgenix have steep upfront costs. At $3.5 million per dose, the medication is the most expensive in the world. Even at this astronomical price, the medication will ultimately save the healthcare system – and taxpayers – significant sums of money. An adult patient requiring regular infusions of Factor IX (the clotting protein) costs private insurers and government insurers (e.g., Medicaid and Medicare) $300,000 to $500,000 annually. 

A young adult taking Hemgenix could save $15 to 20 million over the course of his or her lifetime just by avoiding these recurring expenses. These savings can certainly add up, considering that spending on hemophilia treatments has been rapidly increasing in recent years. From 2005 to 2019, taxpayer-funded Medicaid spending on hemophilia treatments skyrocketed from $521 million to $1.57 billion. Lowering these astronomical figures would not only result in lower tax bills, but in lower premiums for the private beneficiaries of insurance plans. And most importantly, patients suffering from this terrible disease will no longer have to think about when and where they’ll get their next treatment.
 
Gene therapy clearly has the potential to change countless lives and put a dent in healthcare spending. However, these therapies cannot work their magic without a regulatory system to accommodate them. The National Institutes of Health notes that, “[g]ene therapy is particularly relevant to rare disease patients, as more than 80 percent of rare diseases have a known monogenic (single-gene) cause.” That can pose a real problem for the FDA approval process, which relies on large, randomized clinical trials to test the safety and efficacy of medications. Rare disease trials are inherently tricky because there often aren’t enough volunteers to enroll. Some sponsors of diseases for rare drugs have tried to get around this issue by using historical datasets on patients (i.e., external controls) to partially replace actual study volunteers. Despite repeatedly urging more treatments for rare diseases, the agency has been critical of clinical trials using historical or “retrospective” data for controls. In briefing documents, the FDA criticized studies for a pediatric brain cancer drug for relying on some information collected during the 1990s and early 2000s when cancer treatments may have been less effective. In the same analysis, though, the FDA reported that it was in fact able to control for patients’ use of other treatment (i.e., radiation therapy, surgery, chemotherapy) and the time-period of treatment. And, even after adding the controls, the results appear encouraging for the medication. Nonetheless, the message of the briefing documents was clear. Companies using external controls to validate drugs for rare diseases are bound to face considerable FDA scrutiny even when there’s evidence of safety and efficacy.
 
The FDA can widen the pipeline for gene therapies by tempering its skepticism and working with companies to find innovative drug testing strategies. Treatments such as Hemgenix can transform healthcare, but only if officials are willing to give them a chance.
 

BLOGS:
   
Monday:  Why the Most Expensive Medication Ever Is Actually a Great Deal
 
Tuesday:   Latest ballot results show Colorado law giving voters say in muni broadband works
    
Thursday:  USVI Profligacy Demonstrates Need for Heightened Oversight, Distribution of Existing Funds
  
Friday: Op-Ed: Playing Games at the FTC

 
MEDIA:
 
December 9, 2022: Dan Savickas joined ‘Real America’ on One America News Network to discuss the IRS.
 
December 9, 2022: I joined Dakota News Now (Sioux Falls, SD) to discuss Senators’ charter flights. 
 
December 12, 2022: WBFF Fox45 (Baltimore, Md.) interviewed me about pay raises for elected officials.
 
December 12, 2022:  KTIV NBC4 (Sioux City, Ia) quoted TPA in their story, “Rounds, Thune amongst top in Senate for spending on charter flights.”
 
December 12, 2022: KOTA (Rapid City, SD) quoted TPA in their story, “Rounds, Thune amongst top in Senate for spending on charter flights.”
 
December 12, 2022:  The Norfolk Daily News ran TPA’s op-ed, “Common-sense approaches to cost cutting in U.S. Postal Service are needed.”
 
December 12, 2022: KEVN Fox News (Rapid City, SD) quoted TPA in their story, “Rounds, Thune amongst top in Senate for spending on charter flights.”
 
December 12, 2022: The Chronicle-News (Trinidad, Co.) ran TPA’s op-ed, “Latest ballot results show Colorado law giving voters say in muni broadband works.”
 
December 14, 2022: Real Clear Health ran TPA’s op-ed, “Mississippi Medicaid Madness.”
 
December 14, 2022:  All Africa mentioned TPA in their article, “Tobacco Harm Reduction - A Discussion Around Perceptions.”
 
December 15, 2022: WBFF Fox45 (Baltimore, Md.) interviewed me about campaign contributions from a city contractor to the Mayor.
 
December 15, 2022:  Townhall.com ran TPA’s op-ed, “Playing Games at the FTC.”
 
December 15, 2022: I appeared on WBOB Radio (600 AM AND 101 FM Jacksonville, Fla.) to talk about the end-of-year spending bills.
 
December 16, 2022: RealClear Markets ran TPA’s op-ed, “As Meta Aims To Discover the Future of the Metaverse, FTC Throws Rocks.”
 

Have a great weekend!