This is an audio transcript of the FT News Briefing podcast episode: ‘FTC hits pause button on video game deal’

Marc Filippino
Good morning from the Financial Times. Today is Friday, December 9th, and this is your FT News Briefing.

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An antitrust watchdog is trying to stop a huge video game deal in the US. And a European airline is encouraging some riders to take the train instead of flying. Plus, Ukraine has launched an attack on Russian soil. But will Kyiv keep getting the firepower it needs to stay on the offensive? I’m Marc Filippino, and here’s the news you need to start your day.

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The US Federal Trade Commission is suing to stop Microsoft from snapping up Activision Blizzard. Microsoft was going to pay $75bn to acquire the video game maker but the FTC stepped in yesterday to block it. The FT’s US legal and enforcement correspondent Stefania Palma has more.

Stefania Palma
So the FTC’s main allegation in the complaint is that the deal would essentially harm video gaming competitors, especially vis-à-vis Xbox consoles, but also in the cloud gaming industry. And one of the points that they made is that they see Activision as one of the few sort of remaining video game developers that produces but also publishes very, very popular video games such as Call of Duty and World of Warcraft for several devices. And their sort of key thesis is essentially that this deal would allegedly change that.

Marc Filippino
So Microsoft released a statement yesterday after the FTC was going to sue to block the deal. And here’s what the statement said, quote, “We continue to believe that this deal will expand competition and create more opportunities for gamers and game developers.” Stefania, what is Activision saying?

Stefania Palma
So Bobby Kotick, the Activision CEO, has put out a letter to staff saying that he’s still absolutely confident that this deal is going to close, that these anti-competitive accusations are not in line with basically the facts of the matter. And he also took a chance to criticise what he called a regulatory environment, focused on ideology and misconceptions about the tech industry. And this sort of speaks to a very important theme in all of this, which is that this case really represents probably the biggest test for Lina Khan, who chairs the FTC. She is known to be a big tech critic and has vowed to sort of crack down on market power in this space. So there are very, very high stakes for the FTC.

Marc Filippino
Now, we should mention that just a day before the FTC filed this suit, Microsoft signed a 10-year deal with Nintendo, basically allowing a rival to carry one of its biggest games. The timing of this is probably something we should talk about, right, Stefania?

Stefania Palma
Oh, absolutely. The timing was quite uncanny. So 24 hours basically after Microsoft said that it had signed this 10-year deal to bring Call of Duty on to Nintendo’s platforms, which is sort of the first time in almost a decade, just a day after that, the FTC comes out with this complaint. And it’s very likely that Microsoft, as it faces these procedures with the FTC, is most probably going to point to this kind of tie-up to try to address any antitrust concerns. Also, because this mega-deal with Activision was also being probed by the UK and the EU.

Marc Filippino
Stefania Palma is the FT’s US legal and enforcement correspondent.

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The Dutch airline KLM is encouraging its passengers to take the train instead of short flights. They’re trying to find ways to lower emissions and demand for flight surges. Our international business editor, Peggy Hollinger, looked into why the airline has started to see train companies as collaborators, not competitors. Hey, Peggy.

Peggy Hollinger
Hi, Marc.

Marc Filippino
OK, so the idea here is to reduce emissions, which I get. But doesn’t it seem like airlines are kind of going against their own interests here, Peggy?

Peggy Hollinger
Well, there’s not many airlines that come out publicly and said this should happen. KLM is a little bit unique in that regard. A few airlines have had partnerships with railroads. But I think part of the problem is for some of these flagship carriers that have had to compete against the low-cost airlines on these short-haul routes, you know, their own short-haul operations often are not necessarily profitable. Sometimes it might even be easier not to fly some of those routes.

Marc Filippino
So just a few airlines are playing around with this idea right now. But what happens if it catches on with more airlines, Peggy?

Peggy Hollinger
What it doesn’t take into account is the fact that we don’t have a big enough rail network to take all those air passengers. And you would have to then build out a lot of new rail lines, which itself would be polluting. Most people tend to look at this, if you want to do a comparison, say, where can you actually move people from air to rail? You don’t want to compare a flight that will take you from one end of Europe to the other in maybe two hours to the same train journey that might take you seven hours. Passengers won’t want to do that. They’ll want to fly. So you have to generally look at relatively limited short-haul flights between major hubs to look at what the reduction in emissions realistically and practically can be. There was one study that found that if all flights of less than a thousand kilometres went by rail, you’re only saving 3 to 5 per cent of intra-EU aviation emissions. So I think there’s still a lot of uncertainty about how much of a difference this will really make.

Marc Filippino
Peggy Hollinger is the FT’s international business editor. Thanks, Peggy.

Peggy Hollinger
Thank you very much, Marc.

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Marc Filippino
Ukraine has leaned on western allies for defence ammunition and other supplies in the war against Russia. But this week Kyiv conducted long-range strikes without western equipment. Ukraine’s locally made drones hit three military bases deep inside Russia. The FT’s defence and security correspondent JP Rathbone has more.

John Paul Rathbone
They managed to dodge through Russian air defences even though these were strategic air defence bases. One of them is a base for long-range nuclear bombers and has also been the place from which Russia has launched some of its cruise missile attacks on Ukrainian civil infrastructure. So it was a really brazen and daring and startling, frankly, attack deep behind Russian enemy lines.

Marc Filippino
So JP, do these small-scale attacks represent any real threat to Russia and its position in the war?

John Paul Rathbone
It’s got an incredibly important demonstration effect. It shows that if Russia is going to bomb Ukraine, Ukraine now has the capacity, to a certain extent, to bomb Russia using military equipment that it has manufactured, which sends a message also about life there, carrying on as normal. It has an industrial process that carries on. It doesn’t always have to rely on western military aid.

Marc Filippino
So we should say that Russia is going after civilian targets and key infrastructure for survival like power and water. How is Ukraine coping, especially going into winter?

John Paul Rathbone
So just to be very clear, there is no comparison between the amount of damage that Russia is wreaking on Ukraine and what Ukraine is wreaking on Russia. And the Ukraine attacks were on military infrastructure and Russia has been hitting civilian infrastructure. So the Ukrainians have had maybe half of their electrical infrastructure taken out by Russian cruise and ballistic missile attacks and drone attacks. And they’ve been pretty adept and resilient and quick at patching it all up. But it takes time, and heating comes and goes, and power comes and goes, and with that, water supplies. So it’s, the whole idea is to try and demoralise Ukrainians and send them fleeing into Europe and to erode the west’s continuing support for Ukraine. It’s destructive, it’s painful, but it’s not having the effect that Moscow probably would like it to have.

Marc Filippino
Is Ukraine still getting the constant supply of weapons that it needs in order to stand up for itself in this war?

John Paul Rathbone
Most of the western equipment that’s been supplied to Ukraine has come from stockpiles, and those stockpiles have now been depleted. But the west, which is essentially operating in peacetime economies, we don’t have the military industrial complex pouring over in the way that it did during, say, World War 2. That may now be starting to go. And so it’s a difficult question to answer because it’s so sort of granular, but if you’re going to bet on the western industrial machine versus the Russian industrial machine and the bet is which one will better produce weapons ammunitions, I think I know where my money would go.

Marc Filippino
So going into winter between supplies and damaged infrastructure, how is Ukraine looking?

John Paul Rathbone
So on the front lines, the Ukrainians are gonna be much better equipped with warm boots, with food, because they’re on home territory, than the Russians who will be shivering in the trenches, often with shoddy equipment and cold and hungry. Getting through winter, one of the biggest factors is morale basically, in -10, -20 degrees weather. So I think Ukraine is gonna come out much better with much higher morale there, as the weather continues to freeze over.

Marc Filippino
JP Rathbone is the FT’s defence and security correspondent. Thank you, JP.

John Paul Rathbone
Thank you.

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Marc Filippino
You can read more on all of these stories that at FT.com. This has been your daily FT News Briefing. Make sure you check back next week for the latest business news.

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The FT News Biefing is produced by Sonja Hutson, Fiona Symon and me, Marc Filippino. Our editor is Jess Smith. We had help this week from David da Silva, Michael Lello and Gavin Kallmann. Our executive producer is Topher Forhecz. Cheryl Brumley is the FT’s global head of audio. And our theme song is by Metaphor Music.

Copyright The Financial Times Limited 2023. All rights reserved.
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