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Activision Blizzard to pay $35 million to settle SEC charges on workplace disclosures

FILE - This June 13, 2013 file photo shows the Activision Blizzard Booth during the Electronic Entertainment Expo in Los Angeles. Video game maker Activision Blizzard is laying off nearly 800 workers as the company braces for a steep downturn in revenue following the best year in its history. The cutbacks announced Tuesday, Feb. 12, 2019, illustrate the boom-and-bust cycles in an industry whose fortunes are tied to video games that can have a relatively short lives before players move on to the next craze. (AP Photo/Jae C. Hong, File)
The Securities and Exchange Commission announced Friday that Activision Blizzard agreed to pay $35 million to settle charges. (Jae C. Hong/AP)

Video game giant Activision Blizzard will pay $35 million to settle allegations that the company lacked procedures to collect and assess employee complaints of workplace misconduct, and charges that it violated a federal whistleblower protection rule, the Securities and Exchange Commission said Friday.

Santa Monica-based Activision Blizzard settled the case without admitting or denying the SEC's findings.

The settlement is tied to charges that the gaming company failed to maintain controls to ensure that it could assess whether its disclosures regarding its workforce were adequate. The company’s management lacked sufficient information to understand the volume and substance of employee complaints about workplace misconduct, the SEC said.

“The SEC’s order finds that Activision Blizzard failed to implement necessary controls to collect and review employee complaints about workplace 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. “Moreover, 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.”

Activision Blizzard has been embroiled in allegations of workplace harassment and gender discrimination, which have called attention to working conditions in the broader video game industry.

A 2021 Wall Street Journal investigation alleged that the company failed to properly address complaints of misconduct from female employees, leading to government investigations and staff walkouts that threw the firm into disarray.

Last year, Activision Blizzard agreed to set up an $18-million fund for employees who said they experienced sexual harassment, or discrimination, pregnancy discrimination or retaliation. The move came in response to a lawsuit filed by the Equal Employment Opportunity Commission.

The settlement comes amid Microsoft's bid to acquire Activision Blizzard for $68.7 billion — which would be its biggest acquisition to date. The proposed deal raised eyebrows with regulators. The Federal Trade Commission in December said it would seek to block the transaction.

The European Union issued Microsoft a formal antitrust warning over its bid earlier this week, according to Politico. In response, the Washington-based company said it is committed to "finding a path forward" for the deal.

“We are listening carefully to the European Commission's concerns and are confident we can address them,” a spokesperson told Politico.

The SEC’s order said that, between 2018 and 2021, Activision Blizzard knew its ability to attract, retain and motivate employees was an important risk in its business. Nonetheless, the company had failed to implement procedures to collect employee complaints among its separate businesses for disclosure purposes, the agency said.

The SEC order also said that between 2016 and 2021, Activision Blizzard violated a commission whistleblower protection rule by requiring former employees to notify the company if they received a request for information from the commission’s staff.

The order notes that Activision Blizzard has since put in place company-wide structural changes and policies that improved the way employee complaints were required to be documented, maintained and communicated to the company’s senior management and disclosure personnel.

In an email, Activision Blizzard spokesperson Joe Christinat said the company is "pleased to have amicably resolved this matter."

"As the order recognizes, we have enhanced our disclosure processes with regard to workplace reporting and updated our separation contract language," he said. "We did so as part of our continuing commitment to operational excellence and transparency. Activision Blizzard is confident in its workplace disclosures."

This story originally appeared in Los Angeles Times.