US Senators Elizabeth Warren, Bernie Sanders, Cory Booker, and Sheldon Whitehouse have sent a letter to FTC chairwoman Lina Khan asking that she investigate whether Microsoft's planned acquisition of Activision Blizzard could worsen the workplace conditions at the company. The letter, reported by the Wall Street Journal (opens in new tab), also calls out CEO Bobby Kotick's continued role at the company and "golden parachute," saying that failing to hold him accountable for the workplace culture he allowed to flourish "would be an unacceptable result" of the acquisition.
"Workers at Activision Blizzard, following years of rampant sexual misconduct and discrimination and unfair labor practices, have led calls for greater transparency and accountability in the gaming industry, and we are deeply concerned that this acquisition could further disenfranchise these workers and prevent their voices from being heard," the letter states.
"As this proposed deal moves forward in the review process, the Federal Trade Commission (FTC) should assess whether the ways in which these companies have failed to protect the rights and dignity of their workers are driven by monopsony power or amount to anticompetitive harms in our labor market, and if so, if the merger will exacerbate these problems."
The letter makes a specific reference to the reported "frat boy (opens in new tab)" culture at Activision Blizzard, and its recently-finalized $18 million settlement (opens in new tab) with California's EEOC arising from complaints of sexual harassment and discrimination at the company. It also notes that Activision Blizzard is facing a US Securities and Exchange investigation into its handling of workplace misconduct complaints, and that despite his claims to the contrary, Kotick was in fact aware of at least some allegations (opens in new tab) of sexual misconduct complaints, "including alleged assaults," and did not report them to either the board of directors or industry regulators.
The plight of QA workers (opens in new tab) also gets attention: The letter describes them as "undervalued and exploited," working under contracts that pay less than living wages, and subject to arbitrary layoffs.
Interestingly, while Microsoft has at least nominally presented itself as the good guy in this merger, most recently by saying that it "will not stand in the way (opens in new tab)" of unionization efforts at Activision Blizzard, the senators do not seem impressed, calling the proposed acquisition "a cynical and 'opportunistic' attempt to capitalize on the systemic issues" at the company. They take an equally dim view of that promise of non-interference with unionization efforts, saying the commitment is "so vague that it leaves multiple ways for Microsoft to undermine the unionization process and its outcome."
But Kotick is clearly the prime target of the senators' ire. The letter says more than 1,800 Activision Blizzard employees signed a letter calling for him to step down, but Microsoft is "protecting" him under the terms of the acquisition, keeping him as CEO until at least 2023 and ensuring him a massive payday if and when he does leave.
"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."
To be clear, an FTC investigation into the proposed acquisition is going to happen (opens in new tab)—it's obligatory. But the letter suggests that the process may be rougher than anticipated. The general consensus earlier this year was that there might be "some drama" but that approval was likely to happen (opens in new tab), but this letter could increase the pressure on the FTC to push back against it, especially given that the Biden administration in 2021 expressed an interest in heightened enforcement of antitrust laws "to meet the challenges posed by new industries and technologies."
An FTC rejection of the deal wouldn't be without precedent, either. In December 2021, it sued Nvidia (opens in new tab) to stop its proposed takeover of UK-based chip designer Arm, which ultimately contributed to Nvidia's decision to halt the acquisition effort (opens in new tab).
"The FTC should consider the history described above [in the letter] when assessing the anticompetitive effects that this gigantic merger may produce, and carefully determine the meaning of Microsoft's promised to 'not stand in the way' of unionization efforts," the letter concludes. "If the FTC determines that the transaction is likely to enhance monopsony power and worsen the negotiating position between workers and the parties to this deal, we urge you to oppose it."
In an email sent to PC Gamer, an Activision Blizzard spokesperson noted the recent approval of the company's EEOC settlement and said that the Microsoft acquisition "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," the spokesperson said. "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."
The senators' letter to the FTC is available in full at warren.senate.gov (opens in new tab). I've reached out to Microsoft for comment, and will update if I receive a reply.