Report: US Senators urge FTC to scrutinize Microsoft/Activision merger [Updated]

Update 2, April 1: An Activision spokesperson provided Ars Technica with the following statement:

On Tuesday, the federal court approved a settlement agreement between Activision Blizzard and the EEOC that includes an $18M fund to compensate eligible claimants and to bolster enhancements to policies, practices, and training to prevent harassment and discrimination in the workplace, among other commitments. The company is committed to a safe and equitable working environment for all employees and has invested significant resources to ensure we’re creating a model for the industry. The transaction between Microsoft and Activision Blizzard will not interrupt any of the actions the Activision Blizzard’s leadership team has implemented throughout 2021 and is continuing to implement in 2022 with regards to improving our workplace. Activision Blizzard’s leadership team has discussed the company’s goals at length with Microsoft, and Microsoft has reviewed the renewed culture commitment and actions Activision Blizzard have done so far, and the efforts they´ve undertaken. Microsoft is supportive of the goals and the work being done. This is a compelling transaction for all stakeholders, including employees.

No additional special compensation arrangements for Mr. Kotick were entered into in connection with the transaction. Mr. Kotick’s base salary has been reduced to California’s minimum annual salary (which is approximately $62,500 for 2022), and he will not be awarded any bonuses or equity grants until the Workplace Responsibility Committee of the Activision Blizzard Board of Directors has determined that Activision Blizzard has made appropriate progress toward achievement of the transformational gender-related goals and other commitments described in such announcement.

Update, April 1: A spokesperson for Sen. Whitehouse has shared the full text of the letter sent to the FTC. In addition to the issues discussed below, the letter addresses whether Microsoft and Activision’s actions could “amount to anticompetitive harms in our labor market, and if so, if the merger will exacerbate these problems.”

“The proposed acquisition appears to be a cynical and ‘opportunistic’ attempt to capitalize off the systemic issues coming to light at Activision Blizzard,” the letter reads.

“Massive mergers have a way of leaving workers’ concerns on the cutting room floor,” Sen. Whitehouse said in a statement provided to Ars. “We need to guarantee accountability for tech employees—and employees everywhere—who’ve sustained serious abuse at the hands of their employers. I hope the FTC takes a careful look at this deal with an eye toward that accountability.”

Original story, March 31:

Four US senators have sent a letter to Federal Trade Commission Chairwoman Lina Khan expressing concern about Microsoft’s proposed $68.7 billion acquisition of Activision Blizzard, according to a Wall Street Journal report.

In the letter, Sens. Elizabeth Warren (D-Mass.), Bernie Sanders (I-Vt.), Cory Booker (D-N.J.), and Sheldon Whitehouse (D-R.I.) express worry that the merger could hurt efforts to hold Activision management accountable for widespread allegations of abuse, sexual harassment, and discrimination at Activision Blizzard. The letter also takes specific issue with reports that Activision CEO Bobby Kotick will be allowed to stay until the merger is finalized and that the embattled executive might have negotiated a “graceful exit” as part of the merger talks.

“This lack of accountability, despite shareholders, employees, and the public calling for Kotick to be held responsible for the culture he created, would be an unacceptable result of the proposed Microsoft acquisition,” the letter reads in part, according to the report. The senators also expressed general concern about “consolidation in the tech industry and its impact on workers.”

“Workplace culture is a critical priority for Microsoft,” Microsoft Corporate VP and General Counsel Lisa Tanzi told Ars Technica in response to a request for comment. “We believe Activision Blizzard will continue making progress, and we’re committed to further progress after the deal closes. We will constructively engage on unionization issues and will further discuss all of this with the FTC.”

The senators’ offices haven’t responded to a request for comment.

Looking into it

Bloomberg reported in late January that the FTC would be handling the customary antitrust review of the Microsoft/Activision deal. The agency has since sent both companies numerous requests for documents, according to regulatory filings.

Speaking to the Financial Times in February, Microsoft CEO Satya Nadella said he thought the FTC wouldn’t block the proposed merger on antitrust grounds, because the combined company still wouldn’t have a market-controlling position in the fragmented game market. “Even post-this acquisition, we will be number three with a low teens [market] share, where even the highest player is also in the teens [for market] share,” Nadella said at the time.

A group of 15 public policy organizations, including Public Citizen and the Communication Workers of America, sent an open letter to the FTC earlier in March urging the agency to investigate a merger the group said, “fits an alarming pattern of concentration in the gaming industry over the past several years.”

“By absorbing another major gaming studio and publisher, Microsoft will grow its ability to control content and self-preference its own at the expense of market competitors,” that letter said.