The US Federal Trade Commission (FTC) has once again entered into a legal battle with Microsoft, this time by filing a complaint with the Federal Court of Appeal. The reason for the conflict was Microsoft’s plans to fire 1,900 employees from its video game division. The FTC argues that the decision conflicts with Microsoft’s commitment to maintaining the studio’s operational independence while it faces litigation over its merger with Activision Blizzard.
In October 2023, shortly after the UK’s Competition and Markets Authority (CMA) reversed its position and approved the acquisition of Activision Blizzard, Microsoft announced the completion of the merger. However, in the US, the situation was more complicated: the FTC tried to block the merger, but its request for a temporary stay was rejected, which allowed Microsoft to continue the acquisition of Activision Blizzard, despite the lack of official permission from the FTC.
Microsoft assured that after the merger, the structure and management of Activision Blizzard will be organized in such a way that, if necessary, the corporation can easily sell any of Activision’s businesses as independent and competitive units. The company also stated that it intends to operate Activision Blizzard as a game studio with limited integration with Microsoft, thus maintaining its independence.
However, the announcement of the imminent layoffs of nearly 2,000 employees just three months after the deal was completed drew criticism from the FTC. In its letter to the U.S. Court of Appeals for the Ninth Circuit, the FTC said such actions contradicted Microsoft’s previous statements and undermined the FTC’s ability to enforce effective merger enforcement actions.
“Microsoft reportedly said the layoffs were part of an “implementation plan” aimed at reducing “areas of duplication” between Microsoft and Activision, which is inconsistent with Microsoft’s claim in court that the two companies would operate independently after the merger” the FTC said in a statement.
The complaint, filed by the FTC in the U.S. Court of Appeals for the Ninth Circuit, raises serious concerns about whether Microsoft can return to its pre-merger status with Activision Blizzard if the court ultimately rules that the deal was illegal. It’s also reminiscent of Microsoft’s past promises following its acquisition of Bethesda, when it promised it wouldn’t limit its games to competitors’ platforms but then made several games exclusive to Xbox.
The FTC actively works to protect the interests of the marketplace and consumers by promoting fair competition in the gaming industry. While the outcome of the lawsuit against the Microsoft-Activision Blizzard merger is unclear, the FTC’s initiatives highlight the importance of major tech players in the market being honest and transparent.