Dive Brief:
- The Securities and Exchange Commission fined Activision Blizzard $35 million on charges that the video gaming company lacked adequate controls for handling complaints of workplace misconduct and violated an SEC whistleblower protection rule.
- Activision Blizzard, which Microsoft aims to buy for $69 billion, knew from 2018 until 2021 that it faced risks to its ability to attract, retain and motivate employees but lacked procedures for collecting and analyzing complaints of misconduct and for assessing whether public disclosure was necessary, the SEC said Friday. Under agency rules, public companies are required to disclose risks and changes in the business outlook.
- The company “failed to implement necessary controls to collect and review employee complaints about workforce misconduct, which left it without the means to determine whether larger issues existed that needed to be disclosed to investors,” Jason Burt, director of the SEC’s Denver regional office, said in a statement.
Dive Insight:
Describing a second alleged violation, the SEC said that in separation agreements from 2016 until 2021, Activision Blizzard required that employees provide notice to the company if they received a request from the SEC for information, the agency said.
“Taking action to impede former employees from communicating directly with the commission staff about a possible securities law violation is not only bad corporate governance, it is illegal,” Burt said. The company early last year removed the notification clause from its separation agreements.
Activision Blizzard agreed to pay the $35 million penalty without admitting or denying the SEC’s findings, the agency said.
“We are pleased to have amicably resolved this matter,” an Activision Blizzard spokesman said in a statement, adding “we have enhanced our disclosure processes with regard to workplace reporting and updated our separation and contract language.”
Activision Blizzard, the creator of “Call of Duty,” “World of Warcraft” and other video games, has been under regulatory scrutiny for several years.
The California Civil Rights Department sued the company in July 2021, alleging that women employees were sexually harassed and paid less than men. The agency at the time was called the Department of Fair Employment and Housing.
Activision Blizzard denied the allegations. Later in 2021 the company agreed in a settlement with the U.S. Equal Employment Opportunity Commission to create an $18 million compensation fund.
In recent regulatory action, the Federal Trade Commission announced in December that it seeks to block Microsoft’s acquisition of Activision Blizzard.
The video-gaming deal, the largest on record, would enable Microsoft to stifle competition to its Xbox consoles, subscription content and cloud-gaming business, the FTC said in a statement. Microsoft in a court filing has opposed the antitrust action, denying that the purchase would give it an unfair advantage against rival companies.
