The FTC has filed a complaint to the Federal Appeals Court about Microsoft’s recent 1,900 staff layoffs. According to the FTC, the company letting go of almost 2,000 staff members goes against its claims that Activision Blizzard would operate independently – a large factor for the approval of the sale.
While the original Microsoft X Activision Blizzard deal had a lot of fine print, the FTC says it seeks to pause the deal, which is still not 100% final, on the grounds that Microsoft has contradicted its original promises to the Federal Trade Commission.
Microsoft stated in the original case that the “post-merger company would be 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.” In short, this means the two companies would operate independently.
The FTC claims the recent 1,900 eliminated jobs in the video game division proves Microsoft had control over these positions and goes against the original guidelines which swayed the sale in the company’s favour.
Microsoft’s recently-reported plan to eliminate 1,900 jobs in its video game division, including in its newly-acquired Activision unit, contradicts the foregoing representations it made to this Court. Specifically, Microsoft reportedly has stated that the layoffs were part of an “execution plan” that would reduce “areas of overlap” between Microsoft and Activision, which is inconsistent with Microsoft’s suggestion to this Court that the two companies will operate independently post-merger.
The FTC says it seeks to prove the recent layoffs violated Section 7 of the Clayton Act.
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.
The FTC seems set on making Microsoft’s life difficult. Even months after the deal got the stamp of approval, the commission is looking for ways to pause it. If Microsoft can prove the layoffs were going to happen with or without the merger, perhaps they can get away with it.
From a local perspective, in South Africa, we have the Competition Committee which also approved this sale. However, a large factor of these corporate approvals goes down to how many jobs would be lost during a merger. The Competition Committee was likely unaware of 1,900 people losing their jobs post-merger. Then again, one can argue that these job losses didn’t specifically affect South African employment.