Microsoft broke promises it made in court during the Federal Trade Commission’s (FTC) antitrust case in 2023 and laid off 1,900 employees in late January. FTC attorney Imad Abyad filed a brief with the U.S. Court of Appeals for the Ninth Circuit on Wednesday, effectively telling on Microsoft. “This newly revealed information contradicts Microsoft’s representations in this litigation,” the FTC attorney wrote.
Microsoft announced on Jan. 15 that it would lay off 1,900 employees from its gaming division — about 8% of that part of the company. A large portion of these layoffs occurred at the newly acquired Activision Blizzard. The percentage of layoffs at Activision Blizzard has not been released, but according to public records, at least 899 of those 1,900 worked in Activision Blizzard’s California offices.
“As we move forward into 2024, Microsoft Gaming and Activision Blizzard leadership is committed to developing a strategy and execution plan with a sustainable cost structure that will support our overall growing business,” CEO Phil Spencer said at the time. “Together, we set priorities, identified areas of overlap and ensured we were all aligned on the best growth opportunities.”
The problem, Abyad wrote, is that Microsoft told the court during its FTC hearings that Microsoft and Activision Blizzard were largely independent of each other. He then gave several examples of places where Microsoft said that “the post-merger company will be structured and operated in a manner that would allow Microsoft to readily divest some or all of Activision’s businesses” – that is, that Activision Blizzard would remain independent.
The FTC attorney also noted in the letter Microsoft’s intention to “maintain the pre-merger status quo” with its “vertical acquisition of Activision,” in specific contrast to a horizontal merger, in which companies often “eliminate layoffs “. Abyad’s point is that Microsoft’s stated plan to operate as a vertically merged “studio with limited integration” implies that there would be no need to eliminate layoffs and lay off workers – at least according to the FTC’s reading.
Not only are the layoffs themselves a problem, but Abyad also pointed to Spencer’s statement that the layoffs reduced the “areas of overlap” between the two companies – which he said contradicts previous statements in court.
The $68.7 billion merger between Microsoft and Activision Blizzard is already complete. Why is the FTC doing this? The The FTC appealed the decision approving the merger in December and still hopes to stop — or rather, reverse — the deal. The court is expected to halt the merger so that the internal process can be completed.
Although it would be a tall order to get a court to agree to this, the FTC appears unfazed. It has reversed previous mergers, such as when grocery chain Whole Foods acquired Wild Oats Marketplace. The deal went through but was later challenged, forcing Whole Foods to settle with the FTC Abandonment of the Wild Oats brand name and 32 stores in 2009, according to Reuters. The likelihood of this happening at Microsoft is slim. But if the FTC did The appeal argues that these layoffs make “effective relief” significantly more difficult.
The San Francisco Court of Appeals has not announced a decision.
