Xbox layoffs “contradict” what was said in Activision antitrust trial, FTC claims

UPDATE 9/2/24: Microsoft has responded to the FTC’s claim that its planned layoff of 1900 people across Xbox and Activision Blizzard goes against what was said in court last year, in regards to how Activision would remain structurally independent.

“In continuing its opposition to the deal, the FTC ignores the reality that the deal itself has substantially changed,” a Microsoft spokesperson said in a statement to Eurogamer.

“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.”

ORIGINAL STORY 8/2/24: The US Federal Trade Commission (FTC) has said the recent spate of layoffs at Microsoft “contradict” what was presented in the antitrust trial over the company’s acquisition of Activision Blizzard.

In a letter submitted to a US Federal Appeals Court yesterday – first spotted by The Verge – the FTC argued the company’s layoff plan differs from how Microsoft represented itself in court proceedings ahead of the merger’s closure last year.

“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’,” FTC counsel Imad D. Abyad wrote.

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“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’.”

The FTC has specifically taken issue with Microsoft’s claims that the layoffs “would reduce ‘areas of overlap’ between Microsoft and Activision”. This, the FTC said, is “inconsistent with Microsoft’s suggestion… that the two companies will operate independently post-merger”.

The FTC argued that the layoffs will make it harder for the agency to get “effective relief” should it prove successful in its pending administrative proceeding.

In January, Microsoft announced it was laying off 1900 employees across its video game teams. In an email sent around the company at this time, Microsoft’s gaming head Phil Spencer called it a “painful decision”. The layoffs followed Microsoft’s $69bn acquisition of Activision Blizzard last year, and its $7.5bn acquisition of Zenimax in 2021.

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