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FTC accuses Microsoft of misleading authorities in Activision Blizzard merger

  • The Federal Trade Commission has asked the US Court of Appeals to pause Microsoft’s acquisition of Activision Blizzard.
  • The Commission has accused Microsoft of contradicting representations made while it was vying for the merger.
  • This contradiction includes the recent layoffs of Activision Blizzard staff despite Microsoft suggesting the two companies would operate independently.

While the acquisition of Activision Blizzard by Microsoft has been complete for a few months already, it appears as if that’s not the view of the Federal Trade Commission (FTC).

Following the announcement last week that 1 900 Activision Blizzard and Xbox employees had been laid off, the FTC has accused Microsoft of misleading authorities in its bid to acquire the creator and publisher of titles such as World of Warcraft.

This is according to a filing in the US Court of Appeals (PDF).

Specifically, the FTC says that the decision to eliminate 1 900 jobs is “inconsistent with Microsoft’s suggestion to this Court that the two companies will operate independently post-merger.”

“The Federal Trade Commission (FTC) writes to notify the Court of Microsoft’s publicly
reported plan to eliminate 1,900 jobs in its video game division. 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,” writes Imad Abyad, counsel for the Federal Trade Commission.

“Microsoft represented to this Court that ‘the post-merger company will be structured and
operated in a way that would readily enable Microsoft to divest any or all of the Activision
businesses as robust market participants in the unlikely event that such a divestiture is ordered’,” Abyad added.

However, the recent layoffs contradict the representations Microsoft made during the merger discussions.

Further to that the FTC goes on to say that Microsoft’s justification for the layoffs – that they are part of an “execution plan” to reduce “areas of overlap” is inconsistent with Microsoft’s assurances that it and Activision Blizzard would operate as two companies post-merger.

As Abyad lays out, the FTC is asking the Court of Appeals to pause the acquisition of Activision Blizzard by Microsoft pending an evaluation of the merger’s anti-trust merits.

“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 reported layoffs thus underscore the FTC’s need for injunctive relief pending completion of the administrative proceeding,” counsel wrote.

While Microsoft seems to be enjoying the fruits of the fight to acquire Activision Blizzard, even if the deal is signed an order against the acquisition could unravel it. We’ve seen this before with Meta’s acquisition of Giphy. After Meta (it was still Facebook back then) acquired the GIF repository in 2020, the Competition and Markets Authority (CMA) in the UK declared that the acquisition weakened competition in the UK and so Meta was ordered to reverse the merger in 2021.

Whether the same could be in store for Microsoft with the FTC’s filing remains to be seen but this story is one we’re going to be keeping a close eye on.

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