FTC lawyer: Microsoft failed to keep its promise of no layoffs after Activision Blizzard merger

The Federal Trade Commission is accusing Microsoft of breaking its promise not to ax employees after it merged with Activision Blizzard last year.

FTC lawyer Imad Abyad filed a complaint with the U.S. Court of Appeals for the 9th Circuit Wednesday saying Microsoft’s layoffs last month contradict its statements from the 2023 antitrust trial that decided the fate of the company’s purchase of Activision Blizzard.

According to Mr. Abyad’s claim, Microsoft asserted during proceedings last year that Activision Blizzard would remain mostly independent. The software giant claimed that it wanted to maintain a “premerger status quo” and that it sought a vertical integration with the video game maker, meaning Microsoft likely wouldn’t need to eliminate overlap or redundancy.

But in January, several months after the merger was approved, Microsoft announced it would be cutting around 1,900 jobs from its gaming division, with 900 coming from Activision Blizzard.

“Together, we’ve set priorities, identified areas of overlap and ensured that we’re all aligned on the best opportunities for growth,” Microsoft Gaming CEO Phil Spencer said after the layoffs were made public.

Microsoft responded to the FTC’s letter on Thursday, claiming that the company was already considering layoffs before the merger was finalized.

“To be clear, while some overlap was identified and some jobs were eliminated, Microsoft has structured and is operating the post-merger company in a way that will readily enable it to divest any or all of the Activision businesses as robust market participants in the unlikely event that a divestiture ultimately is ordered,” Microsoft lawyer Rakesh Kilaru wrote.

The FTC’s letter comes as it tries to undo the merger. In December, the commission filed an appeal to pause the motion over competitive concerns.