The FTC isn’t too happy with Microsoft’s Activision Blizzard layoffs

Microsoft reneged on guarantees it made in court docket throughout its Federal Commerce Fee (FTC) antitrust trial in 2023 by shedding 1,900 workers in late January. FTC lawyer Imad Abyad filed a letter with the U.S. Court of Appeals for the Ninth Circuit on Wednesday, successfully telling on Microsoft. “This newly-revealed information contradicts Microsoft’s representations in this proceeding,” the FTC lawyer wrote.

Microsoft introduced on Jan. 15 that it was shedding 1,900 staff from its gaming division — round 8% of that a part of the corporate. A big portion of these layoffs had been on the newly acquired Activision Blizzard. The proportion of Activision Blizzard layoffs has not been made public, however no less than 899 of that 1,900 labored out of Activision Blizzard’s California places of work, in response to public data.

“As we move forward in 2024, the leadership of Microsoft Gaming and Activision Blizzard is committed to aligning on a strategy and an execution plan with a sustainable cost structure that will support the whole of our growing business,” CEO Phil Spencer mentioned on the time. “Together, we’ve set priorities, identified areas of overlap, and ensured that we’re all aligned on the best opportunities for growth.”

The downside with that, Abyad wrote, is that Microsoft advised the court docket throughout its FTC hearings that Microsoft and Activision Blizzard can be largely unbiased from one another. He then supplied a number of examples of locations the place Microsoft mentioned 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” — that’s, that Activision Blizzard would stay unbiased.

The FTC lawyer additionally cited within the letter Microsoft’s intention “to maintain the pre-merger status quo” with its “vertical acquisition of Activision,” particularly contrasted with a horizontal merger, the place corporations usually “eliminate redundancies.” Abyad’s level is that Microsoft’s acknowledged plan to work as a vertically merged “limited-integration studio” implies it wouldn’t must remove redundancies and lay off staff — no less than within the FTC’s studying.

Not solely are the layoffs themselves an issue, however Abyad additionally known as out Spencer’s assertion that the layoffs lowered “areas of overlap” between the 2 corporations — which he mentioned is inconsistent with earlier statements made in court docket.

The $68.7 billion Microsoft and Activision Blizzard merger is already full, so why is the FTC doing this? The FTC filed to appeal the decision to approve the merger in December, and remains to be hoping to cease the deal — or relatively, undo it. It’s on the lookout for the court docket to pause the merger so it could actually full its in-house trial.

Although getting a court docket to conform to that might be a serious problem, the FTC seems unfazed. It has undone mergers earlier than, like when grocery retailer chain Entire Meals acquired Wild Oats Market. That deal went via, however was later appealed, forcing Entire Meals to settle with the FTC by giving up the Wild Oats brand name and 32 stores in 2009, according to Reuters. The probability of this taking place with Microsoft is slim. But when the FTC did win an enchantment, it’s arguing that these layoffs make “effective relief” a lot tougher.

San Francisco’s Courtroom of Appeals hasn’t introduced a choice.

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