The FTC Isn't Happy About Microsoft's Plan To Lay Off Activision Workers
In October 2023, Microsoft finally closed the controversial deal to acquire gaming major Activision Blizzard. The U.S. Federal Trade Commission and the U.K.'s Competition and Markets Authority (CMA) were among the handful of antitrust bodies against this mega-merger. In the U.S., the FTC was involved in a courtroom battle with Microsoft, which eventually ended in favor of the software giant. Following the go-ahead from the court, Microsoft eventually completed the acquisition for a staggering $68.7 billion, despite the FTC's appeal against the ruling.
Fast forward to February 2024 — barely four months into the acquisition — it is now clear that Microsoft's troubles with the FTC are far from over. Microsoft is now once again under the scanner after the company announced plans to cut 1,900 jobs from its video game division. This move has led to the FTC raising concerns about the independence of the newly acquired Activision Blizzard Inc. The FTC alleges that this move contradicts Microsoft's earlier commitment to operate Activision Blizzard as an independent entity.
In a recent letter addressed to the 9th U.S. Circuit Court of Appeals, the FTC expressed its concerns about the recent layoffs, stating that these developments compromise the agency's ability to order effective relief in case a higher court deems Microsoft's Activision Blizzard acquisition unlawful. The agency contends that the job cuts demonstrate areas of overlap created by the merger and argues that the court should have paused Microsoft's integration of the two companies in the midst of an ongoing trial.
Activision not operating as a separate entity: FTC
At the heart of the FTC's argument lies the apparent contradiction between Microsoft's earlier assurances and its recent actions. During the initial merger review process, Microsoft told the courts that Microsoft and Activision Blizzard would operate as separate entities following the merger. The tech giant had also promised the court that it would maintain the pre-merger status quo.
However, Microsoft's recent decision to cut more than 1,900 jobs in its video game division also included Activision employees. The FTC argues that had Activision been truly independent as Microsoft initially claimed, these layoffs at Activision would have never happened.
It's worth noting that the job cuts at Activision Blizzard spanned several teams, including Blizzard's esports divisions and subsidiary studio Toys for Bob. Also affected were employees associated with Blizzard's unreleased survival game, codenamed Odyssey. Microsoft defended its actions and claimed that the layoffs were part of an "execution plan" to reduce "areas of overlap" between Microsoft and Activision.
The Ninth Circuit Court of Appeals is currently deliberating on the FTC's appeal, and things could take an interesting turn if it rules in favor of the FTC.