FTC: Um, Those Microsoft Layoffs Contradict What It Told The Courts In Activision Blizzard Acquisition

Late last year, we discussed how the FTC had appealed the court's decision to allow Microsoft's acquisition of Activision Blizzard to move forward. I said at the time that I don't think this appeal is going anywhere, and I still don't thanks to the general toothless nature of regulators in America, but the FTC has decided to poke at the courts over the recent layoffs Microsoft announced, which include staff from Activision Blizzard. I will embed the entire two page letter to the court below, but here's some relevant information as a manner of throat-clearing.

When Microsoft was battling it out with the FTC, and specifically to the question over how much control Microsoft would exert on these studios, it represented to the court that Activision Blizzard would operate with limited integration into Microsoft as a whole. In other words, the studio would operate with more independence than seen in typical acquisitions. This was a particularly important claim for two reasons.

First, because Microsoft was arguing against the injunction the FTC was seeking by stating that this was a vertical" acquisition, rather than a horizontal" one, meaning that the public interest wasn't well-served by such an injunction.

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."

Secondly, Microsoft argued that the end result of the merger was such that Microsoft could, if ordered to by the court in the future, divest itself of these studios. This again relates directly to the limited hand Microsoft claimed it would have if the acquisition was allowed to proceed without the injunction the FTC sought.

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."

Got that? Microsoft said its merger was structured such that an injunction was not necessary because it was a vertical deal, which would avoid eliminating redundancies" in staff and that it would be able to divest itself smoothly from the studios if so ordered, suggesting limited control over studio operations.

All of which is directly contradicted by Microsoft's recent announcement of layoffs that include staff from Activision Blizzard.

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.

I mean...no lies detected? The announcement from Microsoft on these layoffs is pretty cut and dried. As was what it told the court during the FTC hearings.

I still don't expect this to amount to much, because regulation in this country is broken beyond repair, but it probably should.