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Workplace misconduct lawsuit and proposed acquisition by Microsoft (2021–present)

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Main articles: California Department of Fair Employment and Housing v. Activision Blizzard, ABK Workers Alliance, and Acquisition of Activision Blizzard by Microsoft

On July 20, 2021, the California Department of Fair Employment and Housing (DFEH) filed a suit alleging sexual harassment, employment discrimination and retaliation on the part of Activision Blizzard. A second lawsuit was filed against the company by its shareholders asserting it falsified knowledge of these problems in their financial statements,[1] though this suit was dismissed due to failure to meet thresholds for claims,[2] The Equal Employment Opportunity Commission had also filed suit against Activision-Blizzard from their own investigation of the workplace conditions but the company had settled the same day it was filed, which included setting aside an $18 million relief fund for affected employees.[3]

On January 18, 2022, Microsoft announced that it would be acquiring Activision Blizzard for $68.7 billion in an all-cash deal, or approximately $95 per share. Activision Blizzard's stock price jumped nearly 40% that day in pre-market trading. The deal would make Microsoft the third-largest gaming company in the world and the largest headquartered in the Americas, behind Chinese company Tencent and the Japanese conglomerate Sony.

Activision Blizzard's shareholders approved of the acquisition near-unanimously in April 2022.[4] In the United States, the acquisition was reviewed by the Federal Trade Commission (FTC) rather than traditionally by the U.S. Department of Justice, as the agency had raised more concerns over mergers and acquisitions in the Big Tech sector in the last decade.[5] In addition, the U.S. Securities and Exchange Commission (SEC) reviewed potential claims that investors close to Kotick used insider trading prior to the acquisition announcement;[6] Activision Blizzard said they would fully cooperate with the SEC's review.[7]

On April 26, 2023, the United Kingdom's Competition and Markets Authority (CMA) blocked Microsoft's acquisition of Activision Blizzard, claiming that it would lead to "reduced innovation and less choice for UK gamers over the years to come."[8] The same day, Microsoft announced plans to appeal this ruling.[9]

References

  1. ^ Orland, Kyle (August 3, 2021). "Shareholders sue Activision Blizzard for withholding harassment info". Ars Technica. Archived from the original on August 3, 2021. Retrieved August 3, 2021.
  2. ^ Allsup, Maeve (April 20, 2022). "Activision Gets Investor Suit Over Sex Harassment Probes Tossed". Bloomberg Law. Retrieved April 20, 2022.
  3. ^ Robertson, Adi (September 27, 2021). "US employment watchdog sues Activision Blizzard over discrimination claims". The Verge. Archived from the original on September 27, 2021. Retrieved September 27, 2021.
  4. ^ "Activision Blizzard shareholders approve $68.7 bln Microsoft deal". Reuters. April 28, 2022. Retrieved April 29, 2022.
  5. ^ McLaughlin, David (February 1, 2022). "Microsoft Deal for Activision to Be Reviewed by FTC in U.S." Bloomberg News. Archived from the original on February 1, 2022. Retrieved February 1, 2022.
  6. ^ Michaels, Dave; Trachtenberg, Jeffrey (March 8, 2022). "U.S. Probes Trade by Barry Diller, David Geffen Before Big Merger". The Wall Street Journal. Retrieved April 16, 2022.
  7. ^ Browning, Kellen (April 15, 2022). "Activision tells regulators it will cooperate with insider trading investigation". The New York Times. Retrieved April 16, 2022.
  8. ^ "Scoop: UK blocks Microsoft takeover of Activision Blizzard". CNN. April 26, 2023. Retrieved 28 April 2023.
  9. ^ "Scoop: Microsoft vows to appeal as the UK regulator blocks its acquisition of Activision Blizzard". GamesIndustry. April 26, 2023. Retrieved 28 April 2023.

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Workplace misconduct lawsuit and proposed acquisition by Microsoft (2021–present)

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Main articles: California Department of Fair Employment and Housing v. Activision Blizzard, ABK Workers Alliance, and Acquisition of Activision Blizzard by Microsoft

As a result of a two-year investigation, on July 20, 2021, the California Department of Fair Employment and Housing (DFEH) filed a suit alleging sexual harassment, employment discrimination and retaliation on the part of Activision Blizzard. The details of the allegations involve accusations of inappropriate behavior towards women and fostering a "frat boy" culture.[1] The company's management initially tried to pass off the allegations as false, which led to employees sharply criticizing the management's lack of seriousness in the matter.[1][2] Even after CEO's Bobby Kotick's open letter to employees that said their initial response was improper and that they would be internally reviewing matters, employees still staged a walk-off to protest the lack of action the company had taken in regards to the lawsuit.[3] DFEH's lawsuit brought a second lawsuit was filed against the company by its shareholders asserting it falsified knowledge of these problems in their financial statements,[4] though this suit was dismissed due to failure to meet thresholds for claims,[5] and led the U.S. Securities and Exchange Commission to begin evaluating the company.[6] The Equal Employment Opportunity Commission had also filed suit against Activision-Blizzard from their own investigation of the workplace conditions but the company had settled the same day it was filed, which included setting aside an $18 million relief fund for affected employees.[7] Kotick requested the board to reduce his pay to the bare minimum required by California law in August 2021 and withhold his bonuses until the lawsuit was resolved, after a $155 million bonus package he received in July 2021 following investors criticism on the size of the package.[8][9][10] A Wall Street Journal report in November 2021 alleged that Kotick knew about misconduct and sexual harassment within the company without reporting them to the board of directors, leading to an increased pressure on Kotick to leave the company.[11][12] The lawsuit became a debated matter in the industry as it touches on the Me Too movement and lack of unionization for video game developers to protect them from such mistreatment.[13][14][15]

On January 18, 2022, Microsoft announced that it would be acquiring Activision Blizzard for $68.7 billion in an all-cash deal, or approximately $95 per share. Activision Blizzard's stock price jumped nearly 40% that day in pre-market trading. The deal would make Microsoft the third-largest gaming company in the world and the largest headquartered in the Americas, behind Chinese company Tencent and the Japanese conglomerate Sony. Goldman Sachs will serve as the financial advisor to Microsoft, and Allen & Company will be Activision's financial advisors. Simpson Thacher will serve as legal advisor for Microsoft while Skadden will serve as legal advisor for Activision.[16] The deal has been approved by both companies' board of directors and is expected to close in 2023 following international government regulatory review of the action.[17][18] Upon completion of the deal, Activision Blizzard would be a sibling entity to Xbox Game Studios under a new Microsoft Gaming division with Phil Spencer as its lead. The deal would also allow Microsoft to offer Activision Blizzard games on its Xbox Game Pass service.[18] Spencer also spoke to reviving some of the games in Activision Blizzard's past that he himself enjoyed, mentioning series such as King's Quest, Guitar Hero and Hexen: Beyond Heretic.[19]

Kotick stated that he, Spencer, and Microsoft's CEO Satya Nadella have had discussions in 2021 on their concern of the power of Tencent, NetEase, Apple, Inc. and Google, and that Activision Blizzard lacked the computation expertise in machine learning and data analytics that would be necessary to compete with these companies. According to Kotick, this led to the idea of Microsoft, which does have those capabilities, acquiring Activision Blizzard at an attractive price point.[20] In a statement released on Activision Blizzard's investor website, the company said its industry is the "most dynamic and exciting category of entertainment across all platforms" and that gaming will be the forefront of the development of the emerging metaverse. Some journalists saw this acquisition, and Microsoft's March 2021 acquisition of Bethesda Softworks, as a bid to compete against Meta Platforms, formerly known as Facebook.[21][17][18]

The timing of the acquisition was reported by The Wall Street Journal and Bloomberg News to be in response to the ongoing DFEH lawsuit. Reports from both newspapers stated that Activision Blizzard had been considering a buyout from other companies, including Facebook parent company Meta Platforms, due to the weaker than expected financial performance of their latest game releases and production delays.[22][23][24] Based on SEC filings related to the merger, Microsoft approached Activision Blizzard again in the days immediately following the November 2021 Wall Street Journal report regarding a buyout.[25] While Kotick had been hesitant about selling the company, the board had gone ahead with the deal as they continued to fear the ongoing impact of the lawsuit while Kotick remained on the board[22][24] The buyout would provide a graceful exit for Kotick in the future, ranging in $252.2-292.9 million over most scenarios.[22][24][26]

According to official announcements, under the deal Kotick will remain the CEO of Activision Blizzard,[27][28][29][30] and is expected to keep the position while the deal goes through regulatory processes, as Activision Blizzard remains independent from Microsoft until the deal closes.[31] According to The Wall Street Journal, Kotick "will depart once the deal closes" under Microsoft's management, while Kotick said in an interview that he has an interest in remaining in the company.[11][32][33][20] Microsoft has yet to speak directly about the Activision Blizzard lawsuit following news of the acquisition, however the company announced a week prior that it would be reviewing its own sexual harassment and gender discrimination policies.[34]

Several Activision Blizzard employees have expressed cautious optimism with respect to the deal, with the ABK Workers Alliance, a group of employees pushing for unionization in the wake of the DFEH lawsuit, saying the acquisition did "not change the goals" of the Alliance.[35][36][37] A report by Business Insider suggested several Microsoft employees have raised their concern on the deal with respect to the sexual harassment scandals and Activision Blizzard workplace culture, hoping for "concrete steps to make sure we aren't introducing a dangerous and unwelcome culture." On January 19, 2022, World Bank president David Malpass criticized the acquisition, contrasting the acquisition price with the smaller amount of bond financing available to developing countries during the COVID-19 pandemic.[38] After Sony had stated that they expect Microsoft to honor all of Activision Blizzard's publishing agreements for multiplatform games, Spencer and Microsoft president Brad Smith reassured that Microsoft will continue these existing agreements and expressed their desire to keep Call of Duty and other popular Activision Blizzard games on PlayStation beyond the terms of these agreements, as well as explore the opportunity to bring these games to the Nintendo consoles.[39][40][41][42]

Activision Blizzard's shareholders approved of the acquisition near-unanimously in April 2022.[43] In the United States, the acquisition was reviewed by the Federal Trade Commission (FTC) rather than traditionally by the U.S. Department of Justice, as the agency had raised more concerns over mergers and acquisitions in the Big Tech sector in the last decade.[44] U.S. Senators Elizabeth Warren, Bernie Sanders, Sheldon Whitehouse, and Cory Booker expressed their concerns about the merger to the FTC as part of the FTC's investigation, saying that both companies have "failed to protect the rights and dignity of their workers" and that the merger should be opposed if "the transaction is likely to enhance monopsony power and worsen the negotiating position between workers and the parties."[45] In addition, the U.S. Securities and Exchange Commission (SEC) reviewed potential claims that investors close to Kotick used insider trading prior to the acquisition announcement;[46] Activision Blizzard said they would fully cooperate with the SEC's review.[47]

The New York City Employees' Retirement System, which are shareholders of Activision Blizzard, sued the company in April 2022, arguing that the company had made the acquisition deal quickly with Microsoft as to try to cover up the misdoings of Kotick that had been uncovered as part of the ongoing DCEH lawsuit and escape any liability.[48]

Senior executives Lulu Cheng Meservey and Kerry Carr joined the Activision Blizzard board of directors in 2022.[49]

On April 26, 2023, the United Kingdom's Competition and Markets Authority (CMA) blocked Microsoft's acquisition of Activision Blizzard, claiming that it would lead to "reduced innovation and less choice for UK gamers over the years to come."[50] The same day, Microsoft announced plans to appeal this ruling.[51]

References

  1. ^ a b Allsup, Maeve (July 21, 2021). "Activision Blizzard Sued Over 'Frat Boy' culture, Harassment". Bloomberg Law. Archived from the original on August 2, 2021. Retrieved July 22, 2021.
  2. ^ "California sues Activision Blizzard over alleged harassment". BBC. July 21, 2021. Archived from the original on July 27, 2021. Retrieved July 27, 2021.
  3. ^ Schiffer, Zoe; Webster, Andrew (July 27, 2021). "Activision Blizzard employees to walk out following sexual harassment lawsuit". The Verge. Archived from the original on July 28, 2021. Retrieved July 27, 2021.
  4. ^ Orland, Kyle (August 3, 2021). "Shareholders sue Activision Blizzard for withholding harassment info". Ars Technica. Archived from the original on August 3, 2021. Retrieved August 3, 2021.
  5. ^ Allsup, Maeve (April 20, 2022). "Activision Gets Investor Suit Over Sex Harassment Probes Tossed". Bloomberg Law. Retrieved April 20, 2022.
  6. ^ Grind, Kirsten; Needleman, Sarah E. (September 20, 2021). "SEC Is Investigating Activision Blizzard Over Workplace Practices, Disclosures". The Wall Street Journal. Archived from the original on September 20, 2021. Retrieved September 20, 2021.
  7. ^ Robertson, Adi (September 27, 2021). "US employment watchdog sues Activision Blizzard over discrimination claims". The Verge. Archived from the original on September 27, 2021. Retrieved September 27, 2021.
  8. ^ Yin-Poole, Wesley (2021-06-22). "Activision Blizzard boss Bobby Kotick's $155m pay package approved by shareholders". Eurogamer. Archived from the original on January 18, 2022. Retrieved 2022-01-23.
  9. ^ Hayes, Dade (October 28, 2021). "Activision Blizzard CEO Bobby Kotick Concedes Systemic Failures Amid Harassment Claims: "Guardrails Weren't In Place"". Deadline Hollywood. Archived from the original on October 28, 2021. Retrieved October 28, 2021.
  10. ^ "Microsoft deal to deliver $390 million payday for Activision's embattled CEO". euronews. 2022-01-19. Archived from the original on January 23, 2022. Retrieved 2022-01-23.
  11. ^ a b Needleman, Kirsten Grind, Ben Fritz and Sarah E. (November 16, 2021). "Activision CEO Bobby Kotick Knew for Years About Sexual-Misconduct Allegations at Videogame Giant". The Wall Street Journal. ISSN 0099-9660. Archived from the original on November 16, 2021. Retrieved January 18, 2022.{{cite news}}: CS1 maint: multiple names: authors list (link)
  12. ^ Schreier, Jason; Molot, Clara (November 16, 2021). "Activision's CEO Is Embattled by Staff and Investors". Bloomberg News. Archived from the original on November 30, 2021. Retrieved January 18, 2022.
  13. ^ Browning, Kellen; Isaac, Mike (July 29, 2021). "Activision, Facing Internal Turmoil, Grapples With #MeToo Reckoning". The New York Times. Archived from the original on July 30, 2021. Retrieved July 30, 2021.
  14. ^ Gurley, Lauren Kaori (July 29, 2021). "What Can Activision's Own Investigation of Harassment Actually Accomplish?". Vice Waypoint. Archived from the original on August 1, 2021. Retrieved August 2, 2021.
  15. ^ Long, Katherine (July 30, 2021). "Activision Blizzard Employees Walk Out, as Company Hires Law Firm Known for Union-Busting". Paste. Archived from the original on August 2, 2021. Retrieved August 2, 2021.
  16. ^ Jackson, Sierra (2022-01-18). "Simpson Thacher, Skadden drafted for Microsoft's $69 bln Activision buy". Reuters. Retrieved 2022-06-19.
  17. ^ a b Kovach, Steve (January 18, 2022). "Microsoft to buy Activision in $68.7 billion all-cash deal". CNBC. Archived from the original on January 18, 2022. Retrieved January 18, 2022.
  18. ^ a b c Warren, Tom (January 18, 2022). "Microsoft to acquire Activision Blizzard for $68.7 billion". The Verge. Archived from the original on January 18, 2022. Retrieved January 18, 2022.
  19. ^ Park, Gene (January 20, 2022). "Xbox CEO Phil Spencer on reviving old Activision games as Microsoft positions itself as tech's gaming company". Washington Post. Archived from the original on January 21, 2022. Retrieved January 20, 2022.
  20. ^ a b Takahashi, Dean (January 18, 2022). "Bobby Kotick interview: Why Activision Blizzard did the deal with Microsoft". Venture Beat. Archived from the original on January 20, 2022. Retrieved January 18, 2022.
  21. ^ "Activision Blizzard | Microsoft to acquire Activision Blizzard to bring the joy and community of gaming to everyone, across every device". investor.activision.com. Archived from the original on January 21, 2022. Retrieved January 18, 2022.
  22. ^ a b c Grind, Kirsten; Lombardo, Cara; Fritz, Ben (January 19, 2022). "Activision Blizzard's Workplace Problems Spurred $75 Billion Microsoft Deal". The Wall Street Journal. Archived from the original on January 19, 2022. Retrieved January 19, 2022.
  23. ^ Bass, Dina; Lanxon, Nate (January 18, 2022). "Microsoft Buys Scandal-Tainted Activision in Bet on Metaverse". Bloomberg News. Archived from the original on January 18, 2022. Retrieved January 19, 2022.
  24. ^ a b c Bass, Dina; Baker, Liana (January 19, 2022). "Activision Misconduct Fallout Prompted Microsoft to Pursue Deal". Bloomberg News. Archived from the original on January 19, 2022. Retrieved January 19, 2022.
  25. ^ Novet, Jordan (February 18, 2022). "Microsoft's talks with Activision started days after report on sexual misconduct sent stock tumbling". CNBC. Retrieved February 18, 2022.
  26. ^ "ACTIVISION BLIZZARD, INC. - DEF 14A". www.sec.gov. Archived from the original on January 20, 2022. Retrieved 2022-01-20.
  27. ^ "Bobby Kotick will remain as Activision Blizzard CEO after Microsoft acquisition". VGC. January 18, 2022. Archived from the original on January 18, 2022. Retrieved January 18, 2022.
  28. ^ Skrebels, Joe (January 18, 2022). "Bobby Kotick Will Remain Activision Blizzard CEO After Xbox Acquisition". IGN. Archived from the original on January 18, 2022. Retrieved January 18, 2022.
  29. ^ Myers, Maddy (January 18, 2022). "Microsoft buys Activision Blizzard for $68.7B". Polygon. Archived from the original on January 18, 2022. Retrieved January 18, 2022.
  30. ^ "Microsoft to acquire Activision Blizzard to bring the joy and community of gaming to everyone, across every device". Stories. 2022-01-18. Archived from the original on January 21, 2022. Retrieved 2022-01-20.
  31. ^ Mackay, Liam (January 18, 2022). "Microsoft to acquire Call of Duty publisher Activision Blizzard". Charlie INTEL. Archived from the original on January 18, 2022. Retrieved January 18, 2022.
  32. ^ Austin Wood (2022-01-18). "Bobby Kotick will remain Activision Blizzard CEO but reports suggest he may leave once Microsoft deal closes". gamesradar. Archived from the original on January 20, 2022. Retrieved 2022-01-20.
  33. ^ Kaplan, Anna. "Activision Blizzard CEO Kotick Reportedly Leaving Company After Microsoft Deal Closes". Forbes. Archived from the original on January 20, 2022. Retrieved 2022-01-20.
  34. ^ Nightingale, Ed (January 18, 2022). "Microsoft to review its sexual harassment and gender discrimination policies". Eurogamer. Archived from the original on January 18, 2022. Retrieved January 18, 2022.
  35. ^ Nightingale, Ed (2022-01-19). "Activision Blizzard staff react to Microsoft buyout news". Eurogamer. Archived from the original on January 20, 2022. Retrieved 2022-01-20.
  36. ^ Knoop, Joseph (2022-01-18). "The Video Game Industry Reacts to Microsoft Buying Activision Blizzard King". IGN. Archived from the original on January 20, 2022. Retrieved 2022-01-20.
  37. ^ "Activision Blizzard workers cautiously optimistic after Microsoft acquisition". Upcomer. 2022-01-18. Archived from the original on January 20, 2022. Retrieved 2022-01-20.
  38. ^ Lawder, David (2022-01-20). "World Bank chief takes swipe at Microsoft's $69 bln gaming deal as poor countries struggle". Reuters. Archived from the original on January 20, 2022. Retrieved 2022-01-20.
  39. ^ Young, Georgina (2022-01-21). "Microsoft confirms its intent to keep 'Call Of Duty' on PlayStation". NME. Archived from the original on January 21, 2022. Retrieved 2022-01-21.
  40. ^ Jie, Yang (January 20, 2022). "Sony Expects Microsoft to Keep Activision Games Multiplatform". The Wall Street Journal. Archived from the original on January 20, 2022. Retrieved January 20, 2022.
  41. ^ Skrebels, Joe (February 9, 2022). "Microsoft Confirms Activision Blizzard Will Release Games on PlayStation 'Beyond Existing Agreements'". IGN. Retrieved February 9, 2022.
  42. ^ Scullion, Chris (February 10, 2022). "Microsoft's president says 'we want to bring Call of Duty to Switch'". Video Games Chronicle. Retrieved February 10, 2022.
  43. ^ "Activision Blizzard shareholders approve $68.7 bln Microsoft deal". Reuters. April 28, 2022. Retrieved April 29, 2022.
  44. ^ McLaughlin, David (February 1, 2022). "Microsoft Deal for Activision to Be Reviewed by FTC in U.S." Bloomberg News. Archived from the original on February 1, 2022. Retrieved February 1, 2022.
  45. ^ Carpenter, Nicole (April 1, 2022). "Senators push for FTC review of Microsoft and Activision's $69B deal". Polygon. Retrieved April 1, 2022.
  46. ^ Michaels, Dave; Trachtenberg, Jeffrey (March 8, 2022). "U.S. Probes Trade by Barry Diller, David Geffen Before Big Merger". The Wall Street Journal. Retrieved April 16, 2022.
  47. ^ Browning, Kellen (April 15, 2022). "Activision tells regulators it will cooperate with insider trading investigation". The New York Times. Retrieved April 16, 2022.
  48. ^ Totilo, Stephen (May 4, 2022). "New York City sues Activision, targeting CEO Bobby Kotick". Axios. Retrieved May 4, 2022.
  49. ^ King, Hope (April 21, 2022). "Scoop: Activision Blizzard adding 2 women to its board". AXIOS. Retrieved 16 August 2022.
  50. ^ "Scoop: UK blocks Microsoft takeover of Activision Blizzard". CNN. April 26, 2023. Retrieved 28 April 2023.
  51. ^ "Scoop: Microsoft vows to appeal as the UK regulator blocks its acquisition of Activision Blizzard". GamesIndustry. April 26, 2023. Retrieved 28 April 2023.
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