Just a week following Microsoft’s announcement of nearly 2,000 layoffs within its gaming division, the Federal Trade Commission has raised concerns over Microsoft’s adherence to its initial promises regarding the operation of Activision Blizzard post-acquisition, according to a recent report by Engadget. The FTC’s apprehensions were formalized in a complaint submitted to a federal appeals court on Wednesday, calling for a temporary halt on Microsoft’s acquisition of Activision Blizzard amid ongoing investigations into potential antitrust violations.
Microsoft had previously assured the FTC that the acquisition of Activision Blizzard would be managed as a vertical integration, implying that layoffs would be unnecessary due to the absence of overlapping roles. However, the recent job cuts announced on Jan. 30, which impacted employees across Activision Blizzard, ZeniMax, and Xbox, have sparked controversy. Microsoft cited “areas of overlap” between itself and Activision Blizzard as the reason for the layoffs, a statement that the FTC claims contradicts Microsoft’s earlier representations to the court.
The FTC’s complaint highlights the contradiction between Microsoft’s initial assurances and its recent actions, stating, “Microsoft’s recently-reported plan to eliminate 1,900 jobs in its video game division, including in its newly-acquired Activision unit, contradicts the foregoing representations it made to this Court.” This discrepancy forms the crux of the FTC’s argument against the merger’s current trajectory.
While the U.K.’s Competition and Markets Authority gave the green light to Microsoft’s $69 billion acquisition of Activision Blizzard in October, the FTC remains unconvinced, continuing to challenge the merger. The FTC’s ongoing opposition raises the possibility that Microsoft might be compelled to divest portions of Activision Blizzard to address antitrust concerns.
The FTC also expressed concerns that the recent layoffs could hinder its capacity to provide adequate relief to employees adversely affected by the acquisition. This development is part of a broader trend of significant job losses within the video game industry, with an estimated 10,500 individuals laid off in 2023 and an additional 6,000 already facing unemployment in 2024.
In response to the FTC’s accusations, Microsoft has defended its position, stating that the layoffs were not solely due to the merger but were part of broader industry trends. Microsoft’s legal counsel argued that Activision Blizzard had already planned significant job cuts while operating independently. Microsoft maintains that it continues to support its representations to the court and is prepared to divest Activision Blizzard if required, despite the recent layoffs.