The US Federal Trade Commission (FTC) continues its scrutiny of Microsoft’s operations, especially the mass layoffs announced by the company in January. According to the FTC, the layoff of 1,900 employees across Microsoft’s gaming division was contradictory to the court statement the tech giant made during the Activision acquisition saga.
Microsoft fought stiff legal battles across continents to complete the acquisition of Activision Blizzard in October 2023. The deal cost the tech giant a staggering $69 billion. A series of reforms have already been carried out across Xbox, Bethesda, and Activision including the layoffs announced in January.
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Xbox boss had sent a message to staff offering an explanation for the layoffs as well as detailing how the company planned to assist those impacted by the layoff. In the message, Spencer said the decision was taken after a meeting with Blizzard’s leadership where they “set priorities, identified areas of overlap, and ensured that we’re all aligned on the best opportunities for growth”.
The FTC filed a complaint at the 9th US Circuit Court of Appeals on Wednesday, February 7, 2024, as seen in Bloomberg. According to the FTC, the layoff was “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 layoffs impacted several Activision Blizzard studios including Toy 4 Bob, Sledgehammer Games, and Blizzard. Also accompanying the layoffs was the cancellation of unannounced titles including an untitled survival game by World of Warcraft studio. Around 100 people that were working on the game were let go.
Microsoft replies to FTC’s complaint, calling it “misleading”
Microsoft lawyers have replied to complaints raised by the FTC saying its “factual assertions are incomplete and misleading”. According to the tech giant’s lawyers in a letter forwarded to VGC, Activision Blizzard was already planning to make large-scale cuts, regardless of whether the acquisition was completed or not.
“Consistent with broader trends in the gaming industry, Activision was already planning on eliminating a significant number of jobs while still operating as an independent company,” the lawyers claimed. “The recent announcement thus cannot be attributed fully to the merger.”
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“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 tech giant claims the layoff at Microsoft was no different from the ongoing trend in the video game industry. Last year, no fewer than 10,000 people lost their jobs in the video game industry. However, over 6,000 people have already lost their jobs in January this year. If that trend continues, the layoff figures this year will likely trump that of last year.
Different factors have been blamed on the rising video game layoffs including the increasing adoption of AI by different development studios as well as corporate greed. It is claimed that some executives are determined to keep the profit margins seen in the COVID-19 era, hence the need to cut costs through layoffs.
More companies have already written to relevant authorities notifying them of layoffs in the coming months. It is hard to tell when things will return to normal—or if things will ever return to normal.
