Government Actions Send Conflicting Signals for Microsoft-Activision Blizzard Merger

Antitrust litigation between Microsoft, Activision Blizzard and the Federal Trade Commission is in full swing, but a series of conflicting events make the future of gaming’s largest merger uncertain. 

Filed in early December as an FTC adjudicative proceeding and not in federal court, the lawsuit could not just jeopardize the deal for the two entertainment giants—but also present new issues for a set of unionizing bodies within the walls of Activision Blizzard. 

Crucially, because the suit is not filed in federal court, the FTC and its commissioners, including longtime antitrust scholar and now FTC chairwoman Lina Khan, get the final say. Should the administrative judge rule in Activision Blizzard and Microsoft’s favor, the FTC could appeal—to itself.

That process, Microsoft and Activision Blizzard argued in their initial responses, is unconstitutional, harkening back to another case before the Supreme Court which called the FTC the “prosecutor, judge and jury.” 

As of Tuesday, there were no “substantive” settlement talks between Activision Blizzard, Microsoft and the FTC, according to FTC attorney James Weingarten, and as reported by Bloomberg’s Leah Nylen. 

But a Thursday amendment to Microsoft and Activision Blizzard’s responses to the suit might suggest otherwise.

As first reported by Axios, Microsoft and Activision Blizzard withdrew their argument about the constitutionality of the FTC’s adjudication process. A Microsoft public affairs person told Axios that argument was a mistake. Withdrawing that aggressive line of argument, however, suggests that discussions between Microsoft, Activision Blizzard and the FTC may be trending more positively than previously reported. 

The Jacob Wolf Report is a reader-supported venture. Free and paid versions are available. The best way to support us here is by taking out a paid subscription.

While much of the focus of the proposed merger is on how Microsoft's takeover of Activision Blizzard’s rich intellectual property, such as “Call of Duty,” would affect competition in the gaming industry, there is another narrative much less covered. That is the employees. 

There is a trend of unionization at Activision Blizzard right now. A set of quality assurance employees at Raven Software, who work on titles such as “Warzone,” unionized in May. Blizzard Albany followed suit in December. In previous communication, the organizers behind A Better Activision Blizzard King, an advocacy organization consisting of current and former employees, intimated that they hope to unionize, too. 

But the response to unions from Activision Blizzard has not been pretty. When Raven moved to unionize, the company issued a statement that it did not see it fair that a smaller group of employees decided for the entire studio. In August, the Blizzard Albany union organizers accused the company of union busting, hiring law firm Reed Smith to undermine their union efforts. 

Thank you for reading The Jacob Wolf Report. This post is public so feel free to share it.

In October, the National Labor Relations Board found that the company retaliated against the Raven workers, withholding compensation changes (an allegation that Activision Blizzard says is mischaracterized). 

In contrast, Microsoft made a commitment in 2022 to recognize employee unions and struck a “labor neutrality” deal with the Communications Workers of America (CWA). Both the Raven and Blizzard Albany unions are part of the CWA. 

While interview requests I’ve made with Raven and A Better ABK representatives have been declined, several employees I’ve spoken with, who’ve asked to remain anonymous, are fearful of what might happen should the FTC shoot down the deal. Microsoft has shown good progress toward labor relations, they say, much more than Activision Blizzard CEO Bobby Kotick and his current executive staff. 

On Thursday, the CWA voiced its support for the merger to move forward as continued, supporting the stance of those employees. 

As it stands, the future of the Microsoft–Activision Blizzard deal is as good as anyone’s guess, due to conflicting messaging and actions. But there’s one thing for certain: Consumer harm isn’t the only matter at stake.