Microsoft and Xbox have had the Federal Trade Commission (FTC) hot on their heels ever since the Activision Blizzard acquisition was announced. Despite the FTC’s best efforts, the deal still went through, but it seems that it still hasn’t admitted defeat, as the commission aims to prove that Microsoft is going against its initially made promises in court.
This all originates from the layoffs made at the company. After the Activision deal went through, reportedly, a whopping 1,900 employees were laid off from the video game division of the company. This whole situation signaled a horrible work ethic in the gaming industry, and it seems that the FTC has taken notice and is trying to take strict action.
Microsoft/Xbox in Big Trouble with the FTC Once Again
In an official document to the court, the FTC’s Imad D. Abyad states that Microsoft’s representation of the deal to the court has been contradictory. Allegedly, the company and Activision were to remain mostly independent from each other, but the recent layoffs at the company were highly targeted towards Activision employees. At the time, Xbox boss Phil Spencer stated:
Together, we’ve set priorities, identified areas of overlap, and ensured that we’re all aligned on the best opportunities for growth.
However, according to Abyad, the company originally stated 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.
This signaled that both parties were, in fact, supposed to stay largely independent from one another and that the companies were to operate separately, but the layoffs suggest otherwise.
Apparently, the company aimed to “maintain the pre-merger status quo” with a more vertical acquisition-type deal, and according to Abyad, this was preferred over a horizontal acquisition, “where competing entities integrate their operations and, in the process, often eliminate redundancies.“. Obviously, this hasn’t aged well, given the layoffs that have just taken place.
Before ending the document, Abyad once again clearly states:
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.
Ultimately, this seems like quite a strong case that the FTC has made against the company.
Can the FTC Actually Succeed in its Plans?
The merger has already gone through, and it’s been quite a while since it has. It seems that, despite Microsoft’s clear win in the situation, the FTC is aiming to quite possibly undo the deal.
Currently, San Francisco’s Court of Appeals hasn’t responded, but many would argue that the FTC actually has a solid case against the massive company.
It seems that Microsoft may not have gotten the last laugh after all, and now it begs the question, “who will win?“. Will the company keep Activision, or will the FTC finally dismantle the enormous collaboration? It’s unclear right now, but based on the sheer gravity of the situation, we can probably expect updates soon.
Updated February 11th: Microsoft responded to the FTC’s claims with a letter of its own sent to the court on February 8th. It states that in no way has the company violated the terms set in the deal and that it was already considering layoffs before the massive Activision merger.
According to the company’s lawyer, despite the layoffs, the company has still moved forward by keeping up its end of the deal and hasn’t gone against the terms set forth in it. The letter clearly states that:
To be clear, while some overlap was identified and some jobs were eliminated, Microsoft has structured and is operating the post-merger company in a way that will readily enable it to divest any or all of the Activision businesses as robust market participants in the unlikely event that a divestiture ultimately is ordered. This is precisely what Microsoft represented previously.
A Microsoft spokesperson has also reached out to FandomWire with the following statement:
In continuing its opposition to the deal, the FTC ignores the reality that the deal itself has substantially changed. Since the FTC lost in court last July, Microsoft was required by the UK competition authority to restructure the acquisition globally and therefore did not acquire the cloud streaming rights to Activision Blizzard games in the United States. Additionally, Sony and Microsoft signed a binding agreement to keep Call of Duty on PlayStation on even better terms than Sony had before.
The court has yet to reach a conclusive decision.
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