FTC files fresh complaint to halt Microsoft’s acquisition of Activision Blizzard over sacked workers

The Federal Trade Commission (FTC) has filed a complaint against tech giant Microsoft, accusing it of breaching promises made regarding the autonomy of Activision Blizzard post-acquisition.

This comes just one week after Microsoft made headlines with the announcement of nearly 2,000 layoffs within its gaming division, including employees from the recently acquired Activision Blizzard.

The FTC lodged its complaint in a federal appeals court on Wednesday, arguing that the recent downsizing directly contradicts assurances given by Microsoft during the acquisition process. Specifically, the FTC alleges that Microsoft’s pledge to maintain Activision Blizzard’s independence is undermined by the layoffs, which were described by Microsoft as part of an “execution plan” aimed at reducing “areas of overlap” between the two entities.

According to the complaint, Microsoft’s actions “contradict its representations” to the court, where it had asserted that the merged companies would continue to operate independently. This discrepancy forms the crux of the FTC’s argument for a temporary halt to Microsoft’s acquisition of Activision Blizzard, pending further investigation into potential antitrust concerns.

“This newly-revealed information contradicts Microsoft’s representations in this proceeding, which seeks to temporarily pause Microsoft’s acquisition of Activision pending the FTC’s evaluation of the merger’s antitrust merits,” the complaint stated.

Microsoft had previously contended that any necessary divestitures could be easily implemented without disrupting the overall operation of the merged entity.

Microsoft claimed that the public equity favoring an injunction “is more acutely implicated in horizontal mergers, where competing entities integrate their operations and, in the process, often eliminate redundancies.”

However, the recent layoffs have thrown a wrench into this narrative, prompting the FTC to question Microsoft’s commitment to maintaining the pre-merger status quo.

Furthermore, the FTC expressed concerns about the implications of the layoffs on its ability to provide effective relief for affected employees should antitrust violations be established. The layoffs not only undermine the FTC’s enforcement efforts but also exacerbate the challenges faced by workers in an industry already plagued by mass firings.

“Moreover, the reported elimination of thousands of jobs undermines the FTC’s ability to order effective relief should the pending administrative proceeding result in a determination that Microsoft’s acquisition of Activision violated Section 7 of the Clayton Act,” the FTC said.

It added that “the reported layoffs thus underscore the FTC’s need for injunctive relief pending completion of the administrative proceeding.”

This latest development adds another layer of complexity to Microsoft’s acquisition of Activision Blizzard, which had already faced scrutiny from regulatory bodies on both sides of the Atlantic. While the UK’s Competition and Markets Authority had approved the deal in October, the FTC’s persistent antitrust concerns have kept the acquisition in limbo.

The FTC’s complaint underscores the broader challenges facing the video game industry, where thousands of workers have lost their jobs in recent months. With an estimated 6,000 layoffs already recorded in 2024, the gaming industry continues to grapple with instability and uncertainty, further exacerbated by corporate consolidation and regulatory scrutiny.

As Microsoft and the FTC prepare to spar in court over the fate of the Activision Blizzard acquisition, the future of thousands of workers hangs in the balance. Whether Microsoft will be compelled to divest parts of its newly acquired assets or undergo other remedial measures remains uncertain, but one thing is clear: the battle between regulators and tech giants is far from over, and its consequences extend far beyond the boardroom.