Feds Say Activision Layoffs Violate Promises Microsoft Made in Merger Deal

The Federal Trade Commission isn’t happy with the outcome of Microsoft’s $68.7 billion acquisition of Activision Blizzard, telling a court on Wednesday that Microsoft’s recent layoffs contradict promises it made to get the merger approved.

In a letter to the clerk of the Ninth Circuit Court of Appeals, the FTC criticized Microsoft for the layoff of 1,900 workers in January, which represented about 8% of its gaming division. The layoffs largely affected employees at Activision Blizzard. The antitrust regulator explained that the layoffs were “inconsistent with Microsoft’s suggestion to this Court that the two companies will operate independently post-merger.”

“As we move forward in 2024, the leadership of Microsoft Gaming and Activision Blizzard is committed to aligning on a strategy and an execution plan with a sustainable cost structure that will support the whole of our growing business,” Microsoft Gaming chief Phil Spencer said in a memo announcing the layoffs in January. “Together, we’ve set priorities, identified areas of overlap, and ensured that we’re all aligned on the best opportunities for growth.”

The letter comes two weeks after Sen. Elizabeth Warren, D-Massachusetts, urged the FTC to maintain its firm stance against the merger.

“Just 3 months after @Microsoft’s merger with @Activision, 1,900 workers have lost their jobs. I warned that this deal would hurt workers,” Warren said in a Jan. 25 post on X, formerly known as Twitter. “The @FTC should keep up the fight to unwind this merger.”

Microsoft completed its acquisition of Activision Blizzard last October after a nearly two-year fight with regulators. The FTC still hasn’t given up on stopping the happy marriage, though. In December, it filed an appeal with the Ninth Circuit Court of Appeals to undo the merger, a possibility that many legal experts say is highly unlikely.

Given that it’s still fighting against the deal, the FTC concluded in its Wednesday letter that Microsoft’s layoffs of Activision Blizzard employees would make a divestiture harder should the regulator prevail.

For its part, Microsoft is over the FTC’s opposition and said the regulator was ignoring the fact that the merger agreement had changed.

“In continuing its opposition to the deal, the FTC ignores the reality that the deal itself has substantially changed,” a Microsoft spokesperson said. “Since the FTC lost in court last July, Microsoft was required by the UK competition authority to restructure the acquisition globally and therefore did not acquire the cloud streaming rights to Activision Blizzard games in the United States.”

Update 2/8/2024, 1:28 p.m. ET: This post has been updated with additional comment from Microsoft.

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