Lawsuits increase competition – threat of litigation deters encroachment by big business.

The government doesn’t necessarily need to win cases for lawsuits to have an impact. For starters, big cases against big companies send a message designed to discourage future dealmaking. This is particularly true for today’s most successful technology companies, which have long expanded into emerging markets by gobbling up promising startups already on the field. As ex-Biden competition advisor Tim Wu recently noted, it can make a huge difference to an industry if the major players know they’re “under heavy surveillance from the government.”

Even if deals eventually close, regulators see value in everyone understanding that all transactions will be more closely scrutinized. From the outset, companies will find themselves encouraged to make voluntary concessions. In the Activision deal, for example, Microsoft preemptively offered substantial limits on how it will treat Activision’s products post-merger. Flagship titles including Call of Duty, notably, will not be pulled from other platforms, and offered instead as Xbox exclusives.

More broadly, an aggressive, if unsuccessful, litigation strategy can provide a potent disruption to companies deemed too powerful. Cases can take years to resolve. In the interim, senior management may be distracted by spending their time dealing with the lawyers instead of the business. Those enterprises may also second guess current plans, worried that new initiatives will inflame existing lawsuits or weaken their negotiating positions. In the past, IBM, AT&T, Intel, and Microsoft were famously flummoxed for years by antitrust cases that dragged on, much as Google and Meta are today — and perhaps, now, Microsoft again.

But there’s more going on here than just putting companies on notice. The Biden administration believes that taking big swings, even when they whiff, puts pressure on Congress to pass legislation expanding the types of harms antitrust law can remedy, and giving the FTC and the Department of Justice more authority and resources to manage competition. Bills that would do just that circulated in the last Congress, but none made it to a conclusive vote. So, President Biden has called on the new Congress to pass bipartisan legislation, including antitrust reforms, “to hold Big Tech accountable.”