Microsoft Acquires Activision Blizzard Amid Pending Lawsuits and Investigations

Activision Blizzard has had a rollercoaster year. After facing sweeping misconduct and toxic workplace allegations, the young company best known for hit games like Call of Duty and Candy Crush lost its CEO and was publicly excoriated for its male-dominated leadership team. And now, Microsoft has acquired it.

Announced in a press release in January 2022, Microsoft’s acquisition of Activision Blizzard would make the tech giant the third largest gaming platform globally by revenue.  As the creator of landmark video games like World of Warcraft and Overwatch, Activision Blizzard has access to nearly 400 million monthly active players, a market that Microsoft is anxious to tap into in an effort to increase its presence in the gaming industry. 

The gaming industry has been a target in the sites of businesses and specifically tech companies who see this as the new frontier. With a 64% increase in new gamers during 2021 the gaming industry is projected to be one of the fastest growing industries globally and is currently valued at over $200 billion dollars.

The acquisition is a symptom of broader video game industry trends toward cloud gaming. With Activision Blizzard’s intellectual property, Microsoft hopes to bolster the attraction of its Game Pass subscription, through which gamers pay a monthly fee for access to a library of content. As demonstrated by streaming giants Netflix and Hulu, the more variety, the more appeal; this $68.7 billion purchase could radically shift the market in favour of Microsoft, as the first cloud gaming service to have reached the “critical mass” of size that failed competitors like Google Stadia have failed to achieve. 

But the sale is controversial, to say the least. Once valued at $70 billion, Activision Blizzard now finds itself subject to a storm of lawsuits relating to discrimination, wage inequity, sexual harassment, and toxic work culture. 

To compound the issue: Microsoft’s deal may be in legal jeopardy. Since the Biden administration aims to crack down on monopolistic behaviour by large tech companies, its Justice Department has taken a close interest in this potential merger. A potential investigation would be conducted by the Securities Exchange Commission, the federal organisation tasked with regulating financial institutions and wall street to protect the economy by flagging the market manipulation and antitrust behaviour. In January 2022, the Communications Workers of America asked the SEC to open an investigation into what they identify as misleading information that was presented in the Activision Blizzard’s Agreement and Plan for Merger. One such false disclosure claims that the company did not face any unfair labour practice complaints even though one such complaint was filed last September by the CWA.   

In addition to underlying problems with the merger, Microsoft may inherit more problems by welcoming a company embroiled in lawsuits into the fold. A lawsuit in July called for the overhaul of a “frat-boy” workplace culture that dismisses and demeans women’s rights. The SEC opened an investigation in September 2021 following the July lawsuits and a slew of other issues emerged relating to gender-biased pay inequity, sexual harassment claims and even rape allegations. Some labour experts predict that this merger could alienate Microsoft employees. Microsoft has pledged that a complete overhaul of the video game company’s work culture is the number one priority of the acquisition. 

The impact of this merger may radiate past the two businesses to sculpt the landscape of future tech mergers altogether. On the same day Microsoft announced its merger, Lina Khan, Chair of the Federal Trade Commission announced a plan for new guidelines, one that may restrict similar mergers from taking place in the future. Fears of monopolistic behaviour have trickled down to game retailers, leading a store owner to place a sign on PS4 consoles, informing consumers that Blizzard had been acquired by Microsoft and that they should choose their machines wisely. 

Microsoft seeks to jockey its way into the video game industry with this acquisition. However, if the backlash from legislators, regulators, and activists alike is sufficiently severe, this option may be closed off to Microsoft and other tech giants in the future.

By: Dominique Williams