The US Federal Trade Commission (FTC) has complained to a federal appeals court that Microsoft’s layoff of 1,900 employees in its video games division contradicts its statement in court as it fought to acquire Activision Blizzard. The move, as per FTC, undermines Microsoft’s claims that the companies would continue to operate independently.
In late January, Microsoft’s gaming chief Phil Spencer told staff that the company was cutting 8% of its games division’s 22,000 employees — at Activision Blizzard, its Xbox division and ZeniMax, which the company acquired in 2021.The job cuts were the largest among a swath of games industry layoffs in January, including at Riot Games, Unity, Discord, Twitch and elsewhere. Microsoft also let go Blizzard President Mike Ybarra and co-founder Allen Adham, who served as chief design officer.
The cuts are across several divisions at Activision Blizzard, including in Blizzard’s esports department and at subsidiary studio Toys for Bob. Many employees associated with Blizzard’s unreleased survival game, codenamed Odyssey, were also let go. The game has been in development for six years.
Here’s the letter that FTC has sent to the court complaining against Microsoft:
Dear Ms. Dwyer:
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. 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.”
ECF_23 (Opposition to Injunction Pending Appeal) at 24; see also ECF_58 (Answering Brief) at 23, 66. Further, Microsoft argued that the principal public equity that would be served by an injunction—“to maintain the pre-merger status quo”—is “not implicated by Microsoft’s vertical acquisition of Activision, which Microsoft intends to operate as a limited-integration studio.” Microsoft claimed that the public equity favoring an injunction “is more acutely implicated in horizontal mergers, where competing entities integrate their operations and, in the process, often eliminate redundancies.”
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. 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.
Respectfully submitted,
/s/ Imad Abyad
IMAD D. ABYAD
Counsel for
FEDERAL TRADE COMMISSION
In late January, Microsoft’s gaming chief Phil Spencer told staff that the company was cutting 8% of its games division’s 22,000 employees — at Activision Blizzard, its Xbox division and ZeniMax, which the company acquired in 2021.The job cuts were the largest among a swath of games industry layoffs in January, including at Riot Games, Unity, Discord, Twitch and elsewhere. Microsoft also let go Blizzard President Mike Ybarra and co-founder Allen Adham, who served as chief design officer.
The cuts are across several divisions at Activision Blizzard, including in Blizzard’s esports department and at subsidiary studio Toys for Bob. Many employees associated with Blizzard’s unreleased survival game, codenamed Odyssey, were also let go. The game has been in development for six years.
Here’s the letter that FTC has sent to the court complaining against Microsoft:
Dear Ms. Dwyer:
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. 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.”
ECF_23 (Opposition to Injunction Pending Appeal) at 24; see also ECF_58 (Answering Brief) at 23, 66. Further, Microsoft argued that the principal public equity that would be served by an injunction—“to maintain the pre-merger status quo”—is “not implicated by Microsoft’s vertical acquisition of Activision, which Microsoft intends to operate as a limited-integration studio.” Microsoft claimed that the public equity favoring an injunction “is more acutely implicated in horizontal mergers, where competing entities integrate their operations and, in the process, often eliminate redundancies.”
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. 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.
Respectfully submitted,
/s/ Imad Abyad
IMAD D. ABYAD
Counsel for
FEDERAL TRADE COMMISSION
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