The Federal Trade Commission (FTC) has filed a complaint against Microsoft, concerning the company's conduct following its acquisition of video game giant Activision Blizzard. The acquisition, valued at $68.7 billion, is considered the largest of its kind in U.S. history. Despite the deal's conclusion with regulatory approval from the UK Competition and Markets Authority, the FTC continues to examine antitrust issues associated with the merger.
Antitrust Laws in Question
According to the FTC's recent filing with the U.S. Court of Appeals for the Ninth Circuit, Microsoft's decision to lay off 1,900 employees from its video game division, including some from the newly acquired Activision Blizzard, directly conflicts with earlier statements claiming that the companies would operate independently post-merger. The FTC argues that these layoffs might infringe Section 7 of the Clayton Act, designed to prevent mergers that may reduce competition or form monopolies.
Economic Impact and Future Outlook
Despite reporting a notable 49% increase in gaming revenue to $7.1 billion, the video game sector is experiencing workforce reductions. Earlier this year, the industry has seen over 10,500 job eliminations, and already in 2024, 5,900 jobs have been cut. These layoffs come as the industry achieved record profits the previous year. Microsoft's market cap recently reached $3 trillion, indicating robust financial performance across all its sectors, with gaming as the third-highest performer.
Phil Spencer, CEO of Microsoft Gaming, has communicated internally that the job cuts are intended to reduce redundancies and strengthen development teams. Spencer emphasized that those affected have made significant contributions to the success of their respective teams at Activision Blizzard, ZeniMax, and Xbox.
The FTC is seeking injunctive relief as it moves forward with its ongoing investigation. This action by the FTC does not reverse the existing merger but raises questions about the implications of the transaction and Microsoft's future strategy in the gaming market.