Activision Blizzard pays SEC $35 million to settle probe
Bobby Kotick, CEO of Activision Blizzard, attends the Allen & Company Sun Valley Conference on July 8, 2022, in Sun Valley, Idaho.
Kevin Dietsch | Getty Images News | Getty Images
Video game developer Activision Blizzard agreed to pay a $35 million settlement over charges it failed to maintain “adequate” controls for assessing reports of workplace misconduct reporting procedures and that it violated federal whistleblower protection rules, the Securities and Exchange Commission said Friday.
The SEC claimed workplace misconduct complaints were neither collected nor analyzed employee complaints as expected by public disclosure regulations. “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,” SEC director Jason Burt said.
The settlement is not an admission or denial of wrongdoing but concludes a probe that focused on Activision Blizzard’s standards from 2018 to 2021.
Activision Blizzard CEO Bobby Kotick was aware of reports of alleged sexual misconduct at the company, including alleged rape, the Journal reported in 2021.
“Mr. Kotick would not have been informed of every report of misconduct at every Activision Blizzard company, nor would he reasonably be expected to have been updated on all personnel issues,” an Activision Blizzard spokesperson said at the time.
The SEC filing claimed Activision Blizzard required “a significant number” of departing employees who signed separation agreements to tell Activision Blizzard if regulators tried to contact them, or even if those employees wished to make a complaint of their own. Activision Blizzard’s requirement that ex-employees notify the company violated federal whistleblower protections, the SEC claimed.
The SEC noted that it wasn’t aware that of “any specific instances” where an employee was prevented from making a complaint or speaking to regulators.
The SEC order did not explicitly mention Kotick or sexual harassment claims by some employees. Activision Blizzard had been under SEC investigation over the company’s handling of sexual and personal harassment since 2021, the Wall Street Journal previously reported.
“When the Company received complaints we responded to them appropriately and after the extensive and thorough reviews of workplace policies and procedures, workplace practices, compliance, and company data performed by an array of external company advisors including former EEOC Chair Gilbert Casellas, Skadden Arps, WilmerHale, Paul Hastings and CDF Labor Law LLP, the Board concluded there was never widespread or systemic harassment, retaliation or discrimination at the Company,” an Activision Blizzard spokesperson said. “The Board and advisors also concluded there was no evidence that the Company’s senior executives ignored complaints when they were reported.”
Activision took steps from 2020 to 2022 to enhance procedures for handling employee complaints, the SEC order noted.
“As the order recognizes, we have enhanced our disclosure processes with regard to workplace reporting and updated our separation contract language,” an Activision Blizzard spokesperson said on Friday.
The company settled an Equal Employment Opportunity Commission probe in Mar. 2022 for $18 million over related claims of retaliation in connection with sexual harassment claims.
In Dec. 2022, the Federal Trade Commission moved to block Microsoft’s acquisition of Activision, which was announced in January of that year, claiming that the deal would violate federal antitrust laws.
Correction: The SEC said it settled with Activision Blizzard over failure to maintain “adequate” controls for assessing reports of workplace misconduct, not harassment.
Tik Tok creators gather before a press conference to voice their opposition to the “Protecting Americans from Foreign Adversary Controlled Applications Act,” pending crackdown legislation on TikTok in the House of Representatives, on Capitol Hill in Washington, U.S., March 12, 2024.
Craig Hudson | Reuters
The Supreme Court on Friday will hear oral arguments in the case involving the future of TikTok in the U.S., which could ban the popular app as soon as next week.
The justices will consider whether the Protecting Americans from Foreign Adversary Controlled Applications Act, the law that targets TikTok’s ban and imposes harsh civil penalties for app “entities” that continue to carry the service after Jan.19, violates the U.S. Constitution’s free speech protections.
It’s unclear when the court will hand down a decision, and if China’s ByteDance continues to refuse to divest TikTok to an American company, it faces a complete ban nationwide.
What will change about the user experience?
The roughly 115 million U.S. TikTok monthly active users could face a range of scenarios depending on when the Supreme Court hands down a decision.
If no word comes before the law takes effect on Jan. 19 and the ban goes through, it’s possible that users would still be able to post or engage with the app if they already have it downloaded. However, those users would likely be unable to update or redownload the app after that date, multiple legal experts said.
Thousands of short-form video creators who generate income from TikTok through ad revenue, paid partnerships, merchandise and more will likely need to transition their businesses to other platforms, like YouTube or Instagram.
“Shutting down TikTok, even for a single day, would be a big deal, not just for people who create content on TikTok, but everyone who shares or views content,” said George Wang, a staff attorney at the Knight First Amendment Institute who helped write the institute’s amicus briefs on the case.
“It sets a really dangerous precedent for how we regulate speech online,” Wang said.
Who supports and opposes the ban?
Dozens of high-profile amicus briefs from organizations, members of Congress and President-elect Donald Trump were filed supporting both the government and ByteDance.
The government, led by Attorney General Merrick Garland, alleges that until ByteDance divests TikTok, the app remains a “powerful tool for espionage” and a “potent weapon for covert influence operations.”
Trump’s brief did not voice support for either side, but it did ask the court to oppose banning the platform and allow him to find a political resolution that allows the service to continue while addressing national security concerns.
The short-form video app played a notable role in both Trump and Democratic nominee Kamala Harris’ presidential campaigns in 2024, and it’s one of the most common news sources for younger voters.
In a September Truth Social post, Trump wrote in all caps Americans who want to save TikTok should vote for him. The post was quoted in his amicus brief.
What comes next?
It’s unclear when the Supreme Court will issue its ruling, but the case’s expedited hearing has some predicting that the court could issue a quick ruling.
The case will have “enormous implications” since TikTok’s user base in the U.S. is so large, said Erwin Chemerinsky, dean of Berkeley Law.
“It’s unprecedented for the government to prohibit platforms for speech, especially one so many people use,” Chemerinsky said. “Ultimately, this is a tension between free speech issues on the one hand and claims of national security on the other.”
WATCH: It appears TikTok could really get shut down, says Jim Cramer
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