Microsoft is in trouble with the U.S. financial regulator, the FTC. The FTC had only allowed Microsoft to purchase Activision Blizzard (Call of Duty, WoW) because they made certain commitments. However, Microsoft has now violated these commitments by laying off 1,900 people at Activision Blizzard. The FTC is appealing to the appeals court.
This is the situation:
- Microsoft has bought Activision Blizzard for nearly 69 billion US dollars. The deal was so large that they needed the okay from numerous antitrust and financial regulatory agencies worldwide. It took about one and a half years from the offer until the deal was finalized and the merger initiated. However, the deal is not fully completed; the FTC has filed an appeal.
- With such a deal, there is the risk that a monopoly will be created that negatively impacts the market. Sony particularly disliked the merger of Xbox with Activision.
- In order to push the deal through, Microsoft made numerous promises and commitments that no monopoly would be formed and that Activision Blizzard would continue to exist as an independent company. This promise has now been broken.
Especially Call of Duty was a major point of contention between Sony and Microsoft, which threatened the deal:
Layoffs at Activision Blizzard are against the commitments
What are the complaints? An attorney from the FTC has filed a complaint in the appeals court in San Francisco, accusing Microsoft of breaking commitments (via courtlistener):
Microsoft had assured that the merger with Activision would help the entire company grow. Activision Blizzard and Microsoft were to operate largely independently of each other. And Activision Blizzard was supposed to remain mostly the same as it was before the merger.
This has now been called into question. Many jobs have been cut due to overlaps. This directly contradicts the assurances that both companies should remain largely independent.
The attorney also criticizes that Microsoft has released several games from Bethesda exclusively for Xbox, despite having promised European authorities not to do so.
Thus, there is a difference between what Microsoft says and what it ultimately does.
The attorney states that Microsoft contradicts itself, that its actions “undermine” the given commitments, and that Microsoft is “inconsistent” in its statements – this is probably legal jargon for “They lied to us.”
What could happen? As the site Polygon writes, it is theoretically possible that Microsoft might have to undo the merger and release Activision Blizzard.
This has happened in the past: In 2009, two grocery chains merged but lost in the appeals process. Ultimately, the company had to give up 32 stores and a brand name.
The likelihood of this happening to Microsoft is low.
A statement from the appeals court regarding the FTC attorney’s submission is still pending.
Things have gotten quite chaotic at Blizzard: The secret survival game from Blizzard has been canceled – employees are to work on other projects.
