What becomes of Activision’s workplace woes following deal?

An unanswered question from Tuesday's announcement that Microsoft Corp. will pay $68.7 billion in cash for Activision Blizzard is how this deal might impact workplace investigations and lawsuits pending against the Santa Monica based designer of Call of Duty and other popular video games.

The game publishing industry, and particularly Activision Blizzard, have been accused of fostering a workplace that is hostile to women and members of some minority groups. In September, Activision Blizzard entered into a consent decree with the U.S. Equal Employment Opportunity Commission that required the company to establish an $18 million fund for affected workers and to change some workplace practices. EEOC v. Activision Blizzard, 21-CV-7682 (C.D. Cal., filed Sept. 27, 2021. The California Department of Fair Employment and Housing tried, unsuccessfully, to block that deal, arguing it did not go far enough. The department has its own action against Activision Blizzard pending in state court in Los Angeles. DFEH v. Activision Blizzard et al., 21STCV26571 (L.A. Super. Ct., filed July 20, 2021).

Merger and acquisitions specialist Halbert B. Rasmussen said while the $18 million settlement figure was insignificant to Microsoft with its $2 trillion market capitalization, enhanced monitoring duties required by the EEOC agreement and any future deal with the state agency could complicate matters.

"I think there's a potential for that to happen with the agreement or an agreed injunction, to keep some kind of policy enforcement in place," Rasmussen said. "I think it does give Microsoft the opportunity to say, 'This is something that we take extremely seriously. Our company's not tolerating such things.'"

Microsoft has been accused of tolerating sexual misconduct in the workplace including by its founder, Bill Gates. The company announced last week that it had hired Arent Fox to investigate its harassment and discrimination policies.

Representatives of the EEOC and the state agency declined to comment on how the merger might impact their cases against Activision Blizzard. Rasmussen said those issues are almost certainly spelled out in the agreement with Microsoft.

"Typically in an M&A deal, all these liabilities are going to be addressed in the deal documents and there'll be contingencies or protocols for handling them," he said. "For example, there may be something that would provide for a change in ultimate pricing based upon whether the liabilities can be settled before closing of the transaction."

Genie E. Harrison of Genie Harrison Law Firm represents a class of women suing Riot Games over similar allegations. She said the settlement agreement with EEOC reached with Activision Blizzard in September almost certainly deals with the prospect of the company merging with another company.

"In most settlement agreements, there's a standard provision that notes the settlement is binding on successors," Harrison said. "But in the big picture, when there's litigation and a potential acquisition, companies normally negotiate what's going to happen with that litigation. The purchaser is going to assume all of the liabilities and the assets, or it could be an asset acquisition."

Tuesday's merger announcement noted that the deal was subject to the approval of Activision Blizzard's shareholders and of the relevant regulatory bodies.

Goldman Sachs & Co. LLC is serving as financial adviser to Microsoft, Simpson Thacher & Bartlett LLP is serving as its legal counsel. Allen & Company LLC is acting as financial adviser to Activision Blizzard. Skadden, Arps, Slate, Meagher & Flom LLP is serving as legal counsel, according to the announcement.

The announcement came the same day that the Federal Trade Commission and the Department of Justice held a joint news conference announcing plans to revise and toughen up merger enforcement guidelines. FTC Chair Lina M. Khan said that in 2021, the FTC and DOJ received more than double the number of merger filings received on average over the past five years,

"Global deal making in 2021 soared to $5.8 trillion, the highest level ever recorded," Khan said.

At Tuesday's news conference, DOJ and FTC attorneys refused to answer multiple questions regarding the Activision Blizzard acquisition.