The Justice Department would typically handle any probe of Microsoft’s $68.7 billion Activision-Blizzard acquisition — but DOJ antitrust chief Jonathan Kanter’s previous work for Microsoft could throw a wrench into that routine.
Since Kanter spent more than a decade as an advisor to Microsoft on regulatory issues, he would likely be forced to recuse himself from any probe of the Microsoft-Activision deal, insiders say. That increases the likelihood that a review of the deal could be kicked to Lina Khan’s Federal Trade Commission, which also handles antitrust cases, according to former DC-based regulators.
“Who gets to handle this merger is the $69 billion question,” one former regulator told The Post.
As the agencies decide who should handle the review, Khan will likely argue that Kanter’s record with Microsoft means the FTC is better set to handle the deal, the former regulatory sources said.
That’s despite the fact that the Justice Department has handled most major Microsoft mergers in years past, including approving its $20 billion deal last year to buy artificial intelligence maker Nuance and its $26 billion acquisition of LinkedIn in 2016.
The FTC, however, has handled video game mergers, including approving Activision-Blizzard’s 2015 acquisition of King Digital, maker of Candy Crush.
If the agencies can’t agree on who should handle a merger, they will literally flip a coin to decide, the sources said.
The FTC is generally perceived as harsher than the Justice Department, so Microsoft is likely hoping that the DOJ will handle the probe — even if Kanter is forced to recuse himself, according to former regulators.
As Activision-Blizzard’s stock hovers around $82 — well below Microsoft’s planned purchase price of $95 per share — many investors are trying to read the regulatory tea leaves. Some hedge funds have hired law firms to analyze the deal.
One hedge fund attorney said that if the Justice Department reviews the deal, there’s at least a 75% chance that it goes through. If the FTC reviews the deal, it’s less likely to be completed, the attorney predicted.
In a sign that Activision-Blizzard is hedging its bets against regulatory trouble, the deal includes a massive $3 billion “breakup fee” that Microsoft will pay the game developer if the acquisition falls through.
Kanter’s work for Microsoft dates back to 2007, when he represented the company as it sought to block Google’s controversial acquisition of online ad firm DoubleClick.
He also advised Microsoft on some of its biggest acquisitions, including its purchase of LinkedIn in 2016 and $8.5 billion acquisition of Skype in 2011 — and helped lobby the European Commission to sue Google over search bias in the early 2010s while working on behalf of Microsoft, a second source with direct knowledge of the situation said.
He also spent years in Washington, D.C. urging regulators to crack down on Google for the benefit of Microsoft.
“He worked most of his career for Microsoft,” a source with direct knowledge of the situation said. “His main job was dropping dimes on Google.”
In addition to Microsoft, Kanter has also worked for Yelp and New York Post parent company News Corp. Shortly after Kanter was confirmed in November, Google pointed to that previous work in a letter asking that he recuse himself from any Justice Department probes of the search giant.
“Mr. Kanter’s past statements and work representing competitors who have advocated for the cases brought by the Department raise serious concerns about his ability to be impartial,” Google said at the time.
The Justice Department did not immediately respond to a request for comment. The FTC said it does not comment on any potential investigations.