Activision Blizzard to Pay More Than $50 Million to Settle Lawsuit That Spurred Microsoft’s Takeover
California’s Civil Rights Department sued Call of Duty maker in 2021 alleging sexual harassment, discrimination and pay disparity
Activision Blizzard has agreed to pay more than $50 million to settle a high-profile lawsuit by a California regulator that helped spur Microsoft’s MSFT 1.31%increase; green up pointing triangle October takeover of the videogame company, according to people familiar with the matter.
The Civil Rights Department sued Activision in mid-2021, alleging its leadership ignored numerous employee complaints of sexual harassment, discrimination and pay disparity.
California’s Civil Rights Department said Friday the settlement resolves allegations that the company discriminated against women at the company, including by denying promotion opportunities and paying them less than men for doing substantially similar work.
A company representative didn’t immediately comment.
The agency comments came after The Wall Street Journal reported on the settlement.
Santa Monica, Calif.-based Activision has repeatedly denied the state’s charges and said an investigation into the matter by its board of directors concluded they were false. The company has since fired, pushed out or disciplined dozens of employees for misconduct and other issues, in response to an internal investigation.
If finalized, the settlement would be the second-largest by the state agency, behind a $100 million settlement with Riot Games, a smaller California videogame maker, over alleged gender discrimination. Riot apologized after the settlement was announced.
The agreement is subject to court approval. Activision agreed to take additional steps to help ensure fair pay and promotion practices at the company and provide monetary relief to women who worked at the company between 2015 and 2020, the California department said.
The agency had sought an amount much greater than the settlement Riot Games paid earlier this year to settle its lawsuit, according to people familiar with the negotiations. Details of the potential Activision settlement could still change.
The state in 2021 estimated Activision’s liability at nearly $1 billion to 2,500 employees who might have claims against the company, court documents show. Activision had around 13,000 employees as of the end of 2022.
California’s case against Activision stands out because it was part of a series of events that prompted Microsoft to swoop in with its $75 billion bid for the Call of Duty maker. After the suit was filed, federal agencies launched investigations into how the company handled employees’ allegations of sexual misconduct and workplace discrimination.
The Journal reported in the fall of 2021 that Activision CEO Bobby Kotick didn’t inform Activision’s board about some allegations of sexual misconduct within the company. Following the report, Activision’s stock dropped, some employees and investors called for Kotick’s ouster, and Microsoft saw an opening to make a deal. Kotick has said he was transparent with his board of directors.
In early 2022, Microsoft and Activision announced their merger agreement, valuing Activision at $68.7 billion after adjusting for its net cash. Kotick is expected to leave the company he has led for more than three decades at the end of this month.
California’s case against Activision has had challenges. In 2021, Activision agreed to pay $18 million to settle a lawsuit by the U.S. Equal Employment Opportunity Commission, which had been investigating it for allegations of sexual harassment and retaliation. California’s Civil Rights Department—then called California Department of Fair Employment and Housing before its name was changed in 2022—objected to the amount, saying it could ruin the agency’s lawsuit against Activision. A state judge ruled against the agency.
Also in 2021, Activision agreed to pay $35 million to settle claims by the Securities and Exchange Commission tied to its process for deciding whether its disclosures to investors should reflect any employee complaints about workplace misconduct. The federal agency further alleged that Activision violated a whistleblower-protection rule. Activision settled the probe without admitting or denying the SEC’s allegations.
Complicating the state’s case against Activision, California Gov. Gavin Newsom’s office in 2022 fired a lawyer involved in the suit, prompting a second attorney to quit in protest.
Since California filed its suit against Activision, the company has announced several initiatives aimed at making its workplace more inclusive. In 2022, the company’s Blizzard Entertainment unit hired its first vice president, head of culture.