The United States Securities and Exchange Commission announced Friday that Activision Blizzard will pay a $35 million fine for failing to maintain proper workplace disclosure controls and violating whistleblower protections. The SEC has been investigating Activision Blizzard over allegations of misconduct for the past 15 months, and this development marks the official end of that investigation.
In the summer of 2021, the company’s home state charged it with violations of the California Fair Employment and Housing Act. According to the still-pending complaint, the gaming behemoth failed to provide adequate employee protections against workplace harassment and gender discrimination, leading to the departure of many women. The SEC used California’s lawsuit against Activision Blizzard to launch its own investigation into whether the company’s handling of the situation violated its fiduciary duty to investors.
Activision Blizzard failed to implement mechanisms that would have allowed it to detect systemic workplace misconduct between 2018 and 2021, according to the February 3 ruling.
According to SEC Regional Director Jason Burt, who oversaw the recently concluded investigation, this state of affairs left the firm’s management blissfully unaware of any structural issues that needed to be disclosed to investors.
The Commission also discovered that Activision Blizzard took proactive measures to prevent former employees from communicating with federal investigators over a five-year period ending in 2021. Its legal department routinely drafted separation agreements that required former employees to notify Activision Blizzard of any SEC information requests. It thus violated the whistleblower protection rule of the regulator.
In addition to the $35 million fine, the company agreed to a cease-and-desist order regarding its anti-whistleblowing practises in order to settle the SEC’s charges without admitting to any wrongdoing detailed in the Commission’s report. It might have chosen to fight the findings if it hadn’t lost a gender discrimination lawsuit in California late last year. However, with the situation now headed to court, Activision Blizzard likely prioritised settlement over avoiding a final admission of guilt that state prosecutors could later use to bolster their own case.
Activision Blizzard is currently facing a separate antitrust lawsuit from the Federal Trade Commission, which is attempting to block its $69 billion sale to Microsoft. Pre-trial hearings began in January, with some industry sources still expecting the deal to be approved with minor concessions. Microsoft, for one, is confident that the transaction will be completed by mid-2023.
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