Microsoft’s Union Ally Pushes FTC for Activision Merger Deal

(Bloomberg) -- Microsoft Corp.’s newfound support for organized labor has given the company a powerful ally pushing the US Federal Trade Commission for a settlement to allow the software company’s $69 billion acquisition of Activision Blizzard Inc.

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The Communications Workers of America has rallied to the side of one of technology’s biggest companies after Microsoft said it would recognize workers who choose to organize at video-game maker Activision. The union, which represents nearly half a million workers in telecommunications, media, education and technology, has publicly cheered the deal as a breakthrough in an industry that has been hostile to organized labor.

CWA Chief of Staff Jody Calemine said Microsoft’s labor neutrality agreement sets a precedent for corporations pursuing mergers — and should be recognized by the Biden administration, which has cast itself as proudly pro-union. Calemine said the FTC’s decision last month to sue to block the merger was “a huge missed opportunity to really give workers a seat at the table when it comes to mergers and acquisitions.”

“We’re hoping that ultimately the FTC will figure out a way to settle its differences with Microsoft over this transaction,” Calemine said in an interview. “There’s still a chance perhaps that that could happen, that they’d settle this and the acquisition would finally go through.”

The quest for a settlement is a long shot with an FTC whose chair, Lina Khan, has publicly said she’s not interested in alleged monopolies promising to be good monopolies. FTC lawyer James Weingarten told a judge Tuesday that the agency is “always open to any settlement proposal,” but that “there are no substantive discussions at this time” with Microsoft.

Microsoft, maker of the Xbox console, has sought to diffuse complaints from competitor Sony Group Corp. by promising to make Activision’s Call of Duty game available on Sony’s PlayStation for 10 years. But a person familiar with the FTC’s case said that pledge does little to remedy the alleged anticompetitive nature of the deal in all relevant markets, including the mobile and cloud gaming areas that are emerging frontiers in the industry.

FTC spokesperson Peter Kaplan deferred to the agency’s public statements. A Microsoft spokesperson pointed to the company’s public statements as well.

The FTC’s Dec. 8 complaint against the Microsoft-Activision deal was disappointing to labor advocates, especially after Chris Shelton, head of the CWA, met with Khan in October to urge her to let the merger go through. Khan has otherwise been a vocal supporter of organized labor. In September, she told Congress the FTC “has a legal obligation to ensure that we are using our tools and authorities to tackle unfair methods of competition that affect workers.”

One of those tools is the agency’s rule-making power, including a proposal Thursday that would prohibit companies from using non-compete agreements, which the FTC found limits workers’ mobility and suppresses wages. Earlier this week, the FTC ordered three companies and two individuals to cease enforcing non-compete restrictions.

While the CWA welcomed the proposed rule on Thursday, the group said union representation is the best way to improve wages and working conditions. Beth Allen, a CWA spokesperson, said the FTC “could make a significant impact on the control of corporations over our economy, our democracy and our work lives” by considering an employers’ position on unionization “when assessing merger impacts or exercising its other enforcement powers.”

Merger Harms

Brian Callaci, chief economist at the Open Markets Institute, an anti-monopoly organization, said the FTC’s rule-making and enforcement actions are separate from merger reviews like the Microsoft-Activision deal.

The FTC in its complaint doesn’t “mention the labor market, so the harms from the merger are to the consumer side,” Callaci said, adding that an offer to address worker concerns shouldn’t offset the harms to consumers. “This wasn’t a labor market merger. This was a consumer market merger.”

Microsoft contested the FTC’s allegations in a Dec. 22 brief, arguing that consumers would benefit from different ways of accessing popular games. The company said making sure that Activision games are broadly available is “both good business and good for gamers,” highlighting the promise to Sony regarding Call of Duty.

Microsoft President Brad Smith told investors last month that while he’s confident in its case before the FTC’s administrative judge, the company is committed to “offering constructive steps to address” concerns from antitrust authorities and competitors.

“We’ll meet with Sony any time they want to meet, because we’re all about finding solutions,” Smith said in the Dec. 13 call. He also promised to “continue to meet with regulators elsewhere around the world,” as European authorities evaluate the deal.

The European Commission is set to rule on the merger by mid-April. The UK’s Competition and Markets Authority is expected to issue a preliminary report in the next few weeks, with a final decision by April 26. The CMA said three-quarters of the more than 2,000 public comments it received were in support of the merger.

Activision Opposition

The technology industry has historically fought unionization efforts, including Activision’s opposition to workers organizing at two of its studios. The National Labor Relations Board in October found that Activision withheld raises from quality assurance workers who voted to unionize at the Raven Software studio in Wisconsin that makes Call of Duty. Activision also opposed efforts to organize at its Blizzard Studio in Albany, New York.

A third studio, the 57-person Proletariat unit including designers, animators, engineers, producers and quality assurance workers in Boston, said last week that it will seek to form a union. All three unionization efforts are supported by CWA.

In June — the week before Microsoft announced its labor neutrality agreement with CWA regarding the Activision deal — Smith promised to work constructively with Microsoft’s own employees who choose to organize.

About 300 workers at ZeniMax Studios were the first take him up on that offer this week, voting to form a union at the Bethesda, Maryland-based studio. A Microsoft spokesperson said the company looks forward to “engaging in good faith negotiations as we work toward a collective bargaining agreement.”

(Updates with comment from the CWA in the 10th paragraph)

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