The termination of 1,900 employees within Blizzard Entertainment’s video gaming division in January has caught the attention of the Federal Trade Commission.

The FTC, on Wednesday, Feb. 7, filed a complaint with the U.S. Court of Appeals for the Ninth Circuit alleging that the layoffs at Blizzard contradicted Microsoft’s previous promise to continue the independent operation of Blizzard post-merger.

The commission is now seeking an injunction on Microsoft’s $69 billion merger of Blizzard Activision, which was completed in October.

In the letter to the court, FTC attorney Imad D. Abyad wrote, “This newly-revealed information contradicts Microsoft’s representations in this proceeding, which seeks to temporarily pause Microsoft’s acquisition of Activision pending the FTC’s evaluation of the merger’s antitrust merits.”

In response to the letter filed by the FTC, a Microsoft spokesperson provided Irvine Weekly with the following statement — “In continuing its opposition to the deal, the FTC ignores the reality that the deal itself has substantially changed. Since the FTC lost in court last July, Microsoft was required by the U.K. Competition Authority to restructure the acquisition globally and therefore did not acquire the cloud streaming rights to Activision Blizzard games in the United States. Additionally, Sony and Microsoft signed a binding agreement to keep Call of Duty on PlayStation on even better terms than Sony had before.”

In July, Microsoft won an antitrust lawsuit filed by the FTC, in which the commission alleged that the blockbuster merger would lessen competition in the cloud, console and subscription gaming markets.   

In the FTC case ruling, U.S. District Judge Jacqueline Corley referred to the merger as “the largest in tech history,” adding that “scrutiny has paid off.” However, in her denial of the FTC lawsuit, Corley wrote that the FTC failed to prove how the merger would substantially lessen competition — “To the contrary, the record evidence points to more consumer access to Call of Duty and other Activision content. The motion for a preliminary injunction is therefore DENIED.”

On Thursday, Feb. 8, lawyers for Microsoft responded to the FTC’s request for an injunction, emphasizing that the cause behind the reductions at Blizzard could not be attributed to the recent merger with Microsoft. 

“Consistent with broader trends in the gaming industry, Activision was already planning on eliminating a significant number of jobs while still operating as an independent Company,” the letter read. “The recent announcement thus cannot be attributed fully to the merger. More importantly, Microsoft continues fully to stand behind its representations to this Court.”

The recent layoffs at Blizzard were announced via an internal memo from Xbox CEO Phil Spencer on January 15. In the letter, Spencer explained that the company would be “committed to aligning” with a “sustainable cost structure.”  

“As part of this process, we have made the painful decision to reduce the size of our gaming workforce by approximately 1,900 roles out of the 22,000 people on our team,” Spencer wrote. “The Gaming Leadership Team and I are committed to navigating this process as thoughtfully as possible.”

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