The labor union leading the push to unionize workers at Activision Blizzard has called on the Securities and Exchange Commission to investigate the Santa Monica video game publisher for making “inaccurate and misleading disclosures” to investors.
In a letter to SEC chair Gary Gensler on Thursday, the Communication Workers of America alleged that Activision made misleading claims in a Jan. 19 public filing relating to the company’s $69 billion acquisition by Microsoft. The union pointed to Activision’s statements in the filing that it was not aware of any unionization efforts or work stoppages by its employees, nor any “unfair labor practice complaint” against the company.
The CWA noted that with its help, Activision employees have pursued organizing efforts since last summer, with workers at Activision subsidiary Raven Software now seeking to form the first certified labor union at a major North American video game publisher. Raven Software employees also commenced a weeks-long work stoppage in December protesting layoffs at the firm, while the CWA filed a ULP complaint against Activision in September.
The labor union lobbied that by omitting these details, Activision’s disclosures painted an inaccurate portrait of the company to the wider public.
“As a result of these omissions, readers of Activision’s merger filing may be misled into believing that the company’s well-documented workplace disputes, including widespread allegations of abusive behavior including sexual harassment and sexual assault, and multiples strikes and work stoppages—all of which have received extensive, national coverage in multiple media outlets—have been comprehensively resolved,” the CWA wrote in its letter. “In fact, these disputes are ongoing, and both Activision management and its board were well aware that these disputes were unresolved.”
Beyond accusing Activision of misleading investors, the CWA also argued that Activision may have deliberately omitted these details in its merger filing to curtail a potential downturn in its stock price. Investors reacted swiftly when news broke in July 2021 that California state authorities were investigating Activison’s workplace culture, while the stock also took a hit two months later when the SEC began looking into the company for the same reason.
“The significant negative effect that the revelation of these disputes has had on Activision’s share price since they first became the subject of widespread public attention… suggests that beyond merely failing to take care to ensure that it made accurate representations to readers of the merger agreement, Activision may have acted with an improper motive to conceal the true status of its workplace disputes,” the CWA wrote.
Raven Software workers sent their union petition to the National Labor Relations Board this week after Activision declined to voluntarily recognize their Game Workers Alliance union. That paves the way for an NLRB-sponsored vote by the union’s members to force recognition, which would give them the right to collectively bargain employment conditions with their parent company. Raven employees ended their strike and returned to work just this week; the work stoppage was the third at Activision in only a five-month period.
An SEC spokesperson declined to comment on the CWA’s letter. Representatives for Activision did not immediately return a request for comment.
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While video game publisher Activision Blizzard inches toward sealing its $70 billion acquisition by Microsoft, behind the scenes, its employees are ramping up efforts to create a union.
Last week, workers at Raven Software—a Wisconsin-based subsidiary of Activision that leads much of the work on the blockbuster “Call of Duty” franchise—announced that they had formed a labor union and are seeking voluntary recognition by their Santa Monica-based parent company. The move was the culmination of lingering labor unrest at Activision in recent months, as well as growing momentum around organized labor across the gaming industry at large. And it could prove to be the catalyst for a larger unionization drive at Activision as it looks to finalize its massive deal with Microsoft.
According to Alex Dupont—a former quality assurance tester at Raven Software and labor organizer for the Communication Workers of America (CWA) guild—the plan is to bring more of Activision’s roughly 10,000-person workforce into Raven’s Game Workers Alliance union once it is certified. Activision had until Tuesday to voluntarily recognize the Raven union; if it refuses to do so—and indications are that it will not—the union will then proceed with a National Labor Relations Board-sponsored vote to force recognition.
Dupont noted that the union’s Game Workers Alliance name is deliberately open-ended and not tied to just one Activision subsidiary. The labor union would be the first at a major AAA game publisher, while only one certified union exists today at any North American video game studio (independent developer Vodeo Games’ Video Workers United, which only attained recognition in December).
“We definitely hope that other [Activision] locations will see this as kind of a spark—for them to see it is possible that you can get this done,” Dupont said.
After workers at Raven commenced a work stoppage in early December to protest layoffs, they were received with “radio silence” from Activision higher-ups, Dupont told dot.LA. The strike was Activision’s third work stoppage in five months, with employees in Los Angeles having also staged protests over the company’s handling of workplace sexual misconduct allegations. More than 30 employees at Raven subsequently joined forces to form the Game Workers Alliance; the union is part of the CWA’s ongoing Campaign to Organize Digital Employees effort, which has sought to unionize workers at Activision and other game developers.
“There is certainly a lot of positive buzz around other [Activision] employees about the potential of joining [a union],” Marie Carroll, a quality assurance tester at Raven, told dot.LA. “Overall sentiment is pretty supportive and excited for us, which is a really amazing thing to see.”
Carroll said Raven union’s goals include “transparency, equity and diversity” at the company, as well as a desire for quality assurance testers and other rank-and-file employees “to be amplified and heard—for their opinions to be considered alongside voices of developers.”
Instead, Activision is continuing to act unilaterally in managing its employees amid their protests. On Monday, the company informed Raven workers that it would be reorganizing its quality assurance team to “embed” testers across various departments. While Raven studio head Brian Raffel described the changes as having been in the works for “several months,” the move was swiftly condemned by labor organizers as an attempt to stifle the unionization effort.
“This is why big tech mergers that could increase and further concentrate corporate power, like Microsoft’s proposed Activision Blizzard acquisition, deserve real oversight,” CWA organizing director Tom Smith said in a statement responding to the reorganization at Raven. “This scrutiny is even more important when a company like Activision Blizzard impedes its workers from exercising rights that are protected under U.S. law.”
It remains to be seen how Microsoft would approach a unionized workforce inside its company, or what a larger unionization drive at Activision would mean for its acquisition of the Santa Monica game developer. None of Microsoft’s own U.S. workforce is unionized, though some of its workers abroad are. Neither Microsoft nor Activision returned requests for comments.
If the Raven union really is a jumping-off point for a wider unionization effort at Activision, it’s likely that the labor battle will be long and complicated. Nixon Peabody attorney Irene Scholl-Tatevosyan, a labor law specialist who also leads the firm’s esports and gaming industry practice, told dot.LA that folding other Activision employees into the existing Raven union would be far from straightforward.
“With companies that have subsidiaries, you could potentially have union representation across the board, but it’s not necessarily easy,” Scholl-Tatevosyan said. “It is a complicated process to have that done, and it’s not without its legal challenges.”
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Microsoft’s proposed $69 billion acquisition of Activision Blizzard is the video game industry’s biggest-ever deal—but while it will likely create a gaming giant by bringing the “Call of Duty” publisher under the Xbox behemoth’s umbrella, legal experts say there is little chance of the deal being called off due to antitrust violations.
The merger is still subject to approval by federal regulators at the Department of Justice and the Federal Trade Commission, a process which could take up to a year. Until then, Santa Monica-based Activision will continue to operate independently with embattled CEO Bobby Kotick at the helm.
If it is approved, the deal would make Microsoft the world’s third-largest gaming firm based on revenue, behind only Chinese tech conglomerate Tencent and longtime Japanese rival Sony. Still, on market share alone, it is unlikely that the combination would raise antitrust red flags; Microsoft’s share of the gaming industry market was just 6.5% in 2020, according to industry research firm Newzoo, which noted that the addition of Activision would lift that figure to only 10.7%.
Gordon Lang, a former DOJ attorney who now helms law firm Nixon Peabody’s antitrust practice, told dot.LA that the deal’s price tag is “an eye-opener and it's enough to get the agency's attention—but as a practical matter, a price tag by itself is not going to make a transaction that has no competitive issues unlawful.”
The acquisition arrives just as federal regulators have taken an increasing vocal stance toward prosecuting illegal mergers in the tech world. Yet despite the tougher approach, FTC chair Lina Khan—who has earned a reputation as a tough tech industry critic—has indicated that the agency will choose its caseload carefully.
“We have to make very difficult choices about which billion-dollar deals we're going to ensure we're closely investigating, but there are very real trade-offs in terms of what that work is going to come at the expense of,” Khan said last week. She added that regulators will focus their efforts on “instances in which [enforcement] could really change the dynamic in the entire market.”
Given that could bode well for Microsoft, which is no stranger to antitrust litigation. The Seattle giant weathered a historic DOJ antitrust lawsuit at the turn of the century, and since then has remained largely out of the trust-busting conversation.
If anything, Microsoft may argue that the Microsoft acquisition will actually increase gaming industry competition, by giving it more firepower to compete with the likes of Sony. “Microsoft would still only be the No. 3 gaming company” after the merger, Lang noted. “Typically in a situation like this, a merger proponent would say, ‘This isn't going to harm competition, because it's going to be able to make me stronger in competing against the top dogs.’”
For instance, while Microsoft’s Xbox Game Studios has mainly focused on publishing games for its namesake console as well as PCs, it doesn’t have a robust offering of mobile games—a rapidly growing segment of the industry in which Activision has found great success. The Santa Monica publisher’s King Digital Studios subsidiary develops the hugely popular “Candy Crush Saga” title, which raked in $36 million in revenue and clocked 2 million downloads in December 2021 alone, according to digital market analytics firm Sensor Tower. Activision’s “Call of Duty: Mobile” game also recorded 2 million downloads this past December, while generating $19 million in revenue.
Regulators could potentially pay special attention to other areas of the two companies’ gaming businesses, particularly consoles. While gamers can currently play top Activision titles like “Call of Duty'' and “Diablo” on Sony’s PlayStation consoles, Microsoft may look to move some of Activision’s hits to its burgeoning Xbox Game Pass subscription service—making them platform-exclusive, and out of reach to PlayStation gamers, in the process.
Yet Xbox boss Phil Spencer has already looked to downplay such concerns, tweeting last week that Microsoft plans to keep “Call of Duty” available on PlayStation. “Sony is an important part of our industry, and we value our relationship,” Spencer said.
Even as Activision and Microsoft consolidate, there is still room for other developers to expand in what remains a growing video game industry. Nixon Peabody attorney Irene Scholl-Tatevosyan, who leads the law firm’s esports and gaming practice, said she expects the buyout to prompt a flurry of future gaming mergers.
“There's a lot of big dogs within the industry competing with each other—but there's also mid-sized and smaller game studios that are also creating a lot of games, that compete and then eventually get bought out or grow bigger on their own,” Scholl-Tatevosyan told dot.LA. “I think there will be a lot of movement in this space where you see a lot of companies taking more and more [market] share of gaming.”
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