More than two years have passed since Microsoft announced its intention to acquire Activision Blizzard, but the deal continues to be mired in controversy, with Microsoft facing regulatory opposition. The $69 billion deal was finalized in October 2023 after Microsoft navigated regulatory hurdles in the UK, but now the US regulators are raising concerns post-acquisition.
Prior to the acquisition, Microsoft assured the Federal Trade Commission (FTC) that the merging companies would remain largely independent and “maintain the pre-merger status quo.” However, just three months after the acquisition, Microsoft announced 1,900 layoffs across Xbox, Zenimax and Activision Blizzard, accounting for approximately 8% of Microsoft’s gaming division.
Microsoft has claimed that “Activision was already planning on eliminating a significant number of jobs while still operating as an independent company.”
FTC’s Concerns
The FTC’s approval of Microsoft’s deal was largely based on its promise to merge vertically, eliminating the need to lay off workers, as reported by Polygon. The FTC is now citing this as a breach, claiming that layoffs to confront “areas of overlap” directly undermine Microsoft’s claims of a vertical acquisition.
Microsoft Gaming CEO Phil Spencer has acknowledged the “areas of overlap,” suggesting that the layoffs were intended to create a sustainable cost structure to support future growth.
It remains to be seen how damaging Spencer’s acknowledgment will be, but the FTC is looking to the court to halt further merging activity between Microsoft and Activision Blizzard. All this occurs after Microsoft became the biggest public company in the world.
