The FTC is not too happy about the layoffs at Microsoft’s Activision Blizzard
Microsoft went back on promises it made in court during the Federal Trade Commission’s (FTC) antitrust trial in 2023 by laying off 1,900 employees in late January. FTC attorney Imad Abyad filed a brief with the U.S. Court of Appeals for the Ninth Circuit on Wednesday, effectively talking about Microsoft. “This newly disclosed information contradicts Microsoft’s statements in this proceeding,” the FTC attorney wrote.
Microsoft announced on January 15 that it would lay off 1,900 employees from its gaming division – about 8% of that part of the company. A large portion of those layoffs occurred at the newly acquired Activision Blizzard. The percentage of layoffs at Activision Blizzard has not been made public, but according to public records, at least 899 of those 1,900 worked out of Activision Blizzard’s offices in California.
“As we move into 2024, Microsoft Gaming and Activision Blizzard leadership is committed to aligning a strategy and execution plan with a sustainable cost structure that will support the entirety of our growing business,” said CEO Phil Spencer at the time. . “Together we set priorities, identified areas of overlap and ensured we were all on the same page about the best growth opportunities.”
The problem with that, Abyad wrote, is that Microsoft told the court during its FTC hearings that Microsoft and Activision Blizzard would be largely independent of each other. He then gave several examples of where Microsoft said that the “post-merger business will be structured and operated in such a way that Microsoft can easily divest any or all of the Activision businesses” – i.e. that Activision Blizzard would remain independent.
The FTC attorney also cited in the letter Microsoft’s intention “to maintain the pre-merger status quo” with its “vertical acquisition of Activision,” specifically contrasting it with a horizontal merger, where companies often “eliminate layoffs.” Abyad’s point is that Microsoft’s plan to operate as a vertically merged “studio with limited integration” means it won’t have to eliminate layoffs and lay off employees — at least according to the FTC’s interpretation.
Not only are the layoffs themselves a problem, but Abyad also cited Spencer’s statement that the layoffs reduced “areas of overlap” between the two companies — which he said is inconsistent with previous statements made in court.
The $68.7 billion merger of Microsoft and Activision Blizzard has already been completed, so why is the FTC doing this? The FTC has appealed the decision to approve the merger in December, and is still hoping to stop – or rather, undo – the deal. The company wants the court to pause the merger so that the internal process can be completed.
While it would be a major challenge to get a court to agree to that, the FTC seems unfazed. It has previously undone mergers, such as when supermarket chain Whole Foods acquired Wild Oats Marketplace. That deal went through, but was later appealed, forcing Whole Foods to settle with the FTC giving up the Wild Oats brand name and 32 stores in 2009, according to Reuters. The chance of this happening at Microsoft is small. But if the FTC did to win an appeal, it argues that these layoffs make “effective relief” much more difficult.
The San Francisco Court of Appeals has not yet announced a decision.