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Microsoft Fires Back at FTC’s Accusation on Layoffs in Activision Blizzard Legal Battle

Microsoft’s legal counsel has responded to the accusations leveled yesterday by the FTC within the legal battle for the acquisition of Activision Blizzard.

The regulator is appealing against a federal court’s decision to deny a preliminary injunction against the acquisition and sent the 9th Circuit Court of Appeals a letter accusing Microsoft of misrepresenting its stance to the court about the fact that it would be ready to spin off Activision Blizzard should a divestment be ordered. 

The accusation is based on the recent wave of layoffs in which approximately 1,900 employees from Microsoft’s gaming division, many of whom from the recently acquired companies, have lost their jobs. 

The Activision offices in Santa Monica, California (image courtesy of Activision)

Microsoft’s response comes via its own letter addressed to the US Court of Appeals, which the company sent to TechRaptor. 

The letter mentions that the FTC’s letter undermines the primary reason for affirmance, which the company argues is the FTC’s failure to raise a serious question as to whether Microsoft is likely to foreclose competition in the console, cloud, and subscription markets. 

Microsoft argues that the letter provides no basis to overrule the findings of the federal Judge Jacqueline Scott Corley and their regulator’s assertions are “incomplete and misleading.” According to Microsoft’s counsels Activision was already planning on laying off a significant number of jobs while still operating independently, and this is consistent with the broader trend in the gaming industry.

Hence, the recent announcement of the layoffs, Microsoft continues, cannot be attributed fully to the merger. The company “continues fully to stand behind its representation to the Court.” While some overlap was found and some positions were eliminated, the company confirms that it’s still structuring and operating Activision in a way that enables it to be readily divested in the “unlikely” event that this is ordered. 

TechRaptor also received a comment directly from a Microsoft spokesperson, accusing the FTC of ignoring the fact that the reality of the deal has changed:

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. 

Incidentally, there is also news about the request of a temporary restricting order against further layoffs at Microsoft by the law firms behind the so-called “Gamers’ lawsuit.” A status conference in front of Judge Corley has been scheduled for March 14. 

While the acquisition of Activision Blizzard has been closed, the legal battle continues after the fact. In the meanwhile, Microsoft will host an event next week in which it’ll share its vision for the future of Xbox. At the moment, we don’t know if this may affect the proceedings in any way. 

The recent layoffs at Microsoft and Activision Blizzard are indeed part of a larger industry trend that has surfaced between the end of 2023 and the beginning of 2024, affecting many companies like Sony, Bungie2K GamesEpic GamesTencentAmazonFrontierTeam17People can Fly, and more, on top of several of Embracer’s studios

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