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FTC Files Microsoft Complaint over Activision Blizzard Layoffs
Despite Microsoft's $68.7 billion purchase of video game company Activision Blizzard closing last year, the Federal Trade Commission (FTC) is renewing its scrutiny of the biggest acquisition deal in U.S. history.
On Wednesday, the FTC filed a complaint with the U.S. Court of Appeals for the Ninth Circuit, arguing that Microsoft did not represent its true intentions when the merger was first proposed. The federal watchdog group said that last week's layoff of 1,900 Activision Blizzard employees last week "contradicts Microsoft’s representations in this proceeding."
"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," read the complaint. "Specifically, Microsoft reportedly has stated that the layoffs were part of an 'execution plan' that would reduce 'areas of overlap' between Microsoft and Activision, which is inconsistent with Microsoft's suggestion to this Court that the two companies will operate independently post-merger."
The FTC then went on to argue that the actions taken by Microsoft to eliminate almost 2,000 jobs may directly violate Section 7 of the Clayton Act -- which blocks mergers and acquisitions that are carried out to hinder competition or create a monopoly.
While the deal had officially closed in October after getting the green light from the UK Competition and Markets Authority, the FTC has not concluded its own investigation into the acquisition based on its own antitrust concerns. While Wednesday's filing does nothing to halt the already-in-place deal, the FTC is requesting "injunctive relief" as it continues its investigation.
Last week's Microsoft earnings report for Q2 indicated that the company's massive buy is already paying off. The company, which also hit $3 trillion in market cap at the end of January, reported that its gaming revenue saw an increase of 49% to $7.1 billion, year-over-year, positioning it as the third largest performing segment, behind cloud and Office.
Despite the video game sector gaining record profits last year, the industry is experiencing a high contraction among its workforce. In 2023, the industry saw the elimination of 10,500 jobs and, with Microsoft's layoff of 1,900 last week, 2024 has already accounted for 5,900 jobs cut in a little over a month.
In an internal memo, Phil Spencer, CEO of Microsoft Gaming, said that the cuts made last week were designed to eliminate redundancy and better position its developer teams for growth.
"As part of this process, we have made the painful decision to reduce the size of our gaming workforce by approximately 1900 roles out of the 22,000 people on our team," wrote Spencer. "The Gaming Leadership Team and I are committed to navigating this process as thoughtfully as possible. The people who are directly impacted by these reductions have all played an important part in the success of Activision Blizzard, ZeniMax and the Xbox teams, and they should be proud of everything they've accomplished here."