Microsoft "misrepresented" its plans for Activision says FTC

Microsoft issued layoffs of nearly 2,000 people across its gaming division back at the end of January, and now the FTC is stating that Microsoft misrepresented its plans for Activision following the acquisition.

If you’re just getting caught up, Microsoft was given the green light to move forward with its Activision Blizzard acquisition at the end of last year. This was after spending the past couple of years battling regulators. It had to make some concessions to appease the likes of the UK’s Competition and Markets Authority. Which, alongside the FTC, initially opposed the acquisition. At first, the acquisition was only approved in the EU. But fast forward a few months following the CMA’s initial opposition, Microsoft came back with changes to its deal that the CMA was more or less ok with. So it approved the deal and Microsoft was free to finalize things as all of this happened by the designated completion date.

All the while, the FTC has been fighting this deal and trying to stop it. Now the FTC has filed a complaint that alleges Microsoft misrepresented its plans for Activision Blizzard. It’s now attempting to pause the acquisition while it further investigates any potential antitrust issues.

The FTC says the Activision layoffs are in contradiction with what Microsoft said would happen

In the FTC’s complaint, the regulator says Microsoft’s plans to layoff more than 1,900 employees throughout its gaming division are in contradiction with its initial plan. This is where everything comes to a head. Microsoft initially suggested that layoffs wouldn’t need to happen following the acquisition. It was looking at this as a “vertical acquisition” and there would be no redundancies. Meaning everyone’s roles would be an integral part of things moving forward.

Microsoft’s reasoning for the layoffs, however, states something different. As the company notes it found areas of overlap across several studios in its gaming division. This included employees from both Xbox and Zenimax, but also reportedly around 899 employees from Activision Blizzard. The FTC says these particular layoffs are the opposite of what Microsoft said it would do. In short, Microsoft said it wouldn’t issue layoffs, and that Activision Blizzard would operate independently. Then just a couple of weeks ago it issued at least 899 layoffs to Activision Blizzard employees.

According to Engadget, Microsoft says the layoffs would have happened anyway. With or without the acquisition. This statement comes from Microsoft’s own letter issued in response to the FTC’s letter, which it issued on February 8. “Activision was already planning on eliminating a significant number of jobs while still operating as an independent company. The recent announcement thus cannot be attributed fully to the merger,” Microsoft says in its own letter.

Could a merger reversal happen?

It’s tough to say. There’s still no indication that the FTC will be granted its request for pausing the merger. However, it has been done before. Reuters points out that the FTC successfully reversed the acquisition of Wild Oats by Whole Foods back in 2009. Wild Oats was a rival grocer that Whole Foods sought to absorb. The acquisition was granted, but the FTC appealed and won. Whole Foods then had to issue a settlement, which saw Whole Foods having to sell off 32 Wild Oats stores, intellectual property, and related assets.

So, it’s possible. Even if it’s a small chance. And that seems to be what the FTC is shooting for here. Some sort of resolution that results in a merger reversal.