Summary
Microsofthas rejected the Federal Trade Commission’s recent complaints about the mass layoffs at Activision. The regulator previously argued that the move could be used as the basis for reversingMicrosoft’s acquisition of Activision Blizzard, which was completed in October 2023.
Just three months later,Microsoft announced major layoffs, revealing intentions to eliminate around 1,900 positions across its three main game publishing arms: ABK, ZeniMax Media, and Xbox Game Studios. Although the move was framed as a company-wide initiative, subsequent reports from industry insiders and the affected staffers have suggested that the vast majority of those redundancies were identified at the tech giant’s newest subsidiary, Activision Blizzard.
Microsoft Claims ‘Significant’ Activision Layoffs Were Already Planned Pre-Acquisition
A February 7 letter to the U.S. Court of Appeals for the Ninth Circuit subsequently saw theFTC argue Microsoft’s acquisition of Activision Blizzard can be reversedbecause the tech giant previously gave assurances that it would not need to resort to such workforce cutbacks if the $68.7 billion transaction was approved. In an electronic filing submitted a day later, Microsoft rejected that train of thought as misleading, arguing that Activision was already planning to eliminate a “significant number” of positions prior to the acquisition.
The tech giant made no attempt to expand on how “significant” those planned redundancies actually were. It has instead characterized the cutbacks as keeping up in line with “broader” industry trends. For reference, even the most conservative estimates suggest that thousands of people working in game development have lost their jobs since early 2023. One industry veteran recentlydescribed the current state of gaming as a “disaster zone"for professionals trying to make a living.
Consistent with broader trends in the gaming industry, Activision was already planning on eliminating a significant number of jobs while still operating as an independent company.
Microsoft concluded that given the macro trends in the sector, the mass layoffs at Activision can not be “attributed fully” to its late 2023 acquisition. And while the company did acknowledge that the move resulted in some such cutbacks, redundancies are a fairly common side effect of mergers, with their overall volume typically being proportional to the combined size of the consolidating parties. In that context, Microsoft’s decision to eliminate around 9% of its gaming workforce post-acquisition does not stand out as exceedingly anomalous.
Microsoft Is Prepared To Reverse Its Activision Blizzard Acquisition
The tech giant claims it is still willing to reverse its acquisition, having said as much in its February 8 court filing. Elaborating on that point, a company representative explained that the deal was structured in a way that the combined entity can readily divest itself from Activision “in the unlikely event” that such a move is ordered. Describing such a scenario as implausible is accurate, not least because the FTC’s main argument against the acquisition revolved around antitrust issues and not workforce protections. It is hence dubious whether the news oflayoffs across Activision subsidiariescould do anything to change the court’s approval of the deal, as significant as they may be.
