Over 40 US Democrats Demand Comprehensive Review of EA’s Saudi-led Acquisition Due to Labor Concerns

In a robust response to growing unease regarding the potential ramifications of Electronic Arts’ Saudi-led acquisition, 46 House Democrats have penned a letter urging FTC chair Andrew Ferguson to conduct a meticulous examination of the deal. This call to action follows earlier expressions of concern from Senators Richard Blumenthal and Elizabeth Warren about the national security implications and foreign influence associated with the takeover.

The letter, spearheaded by Labor Caucus co-chairs Steven Horsford, Debbie Dingell, Mark Pocan, and Donald Norcross, articulates apprehensions related to possible job losses, studio shutdowns, wage stagnation, and an undesirable consolidation of ownership within the sports and entertainment sectors that could foster anti-competitive behaviors.

According to the letter, there has been a significant drop in median worker earnings at EA over recent years, indicating that the company may already be experiencing insufficient competitive pressure to attract and retain talent. The communication highlights that EA has already cut over 1,700 positions since the beginning of 2023 and warns that if the acquisition proceeds, even more extensive layoffs may follow due to the substantial debt financing involved. This financial burden creates considerable incentives for the acquiring entities to implement aggressive cost-cutting strategies, such as downsizing, offshoring, or restructuring.

The letter echoes concerns previously voiced by industry observers and analysts: broadly, that the acquisition appears unlikely to benefit anyone other than the affluent stakeholders involved. Following the announcement of the acquisition, an in-depth analysis on leveraged buyouts and their associated risks was provided, shedding light on the track record of private equity in managing acquired entities.

While the letter does not address it directly, it’s essential to consider the potential implications of Saudi ownership on future Electronic Arts products. Saudi Arabia’s well-documented hostility towards LGBTQ+ individuals and its criminalization of same-sex relationships, coupled with a historical pattern of human rights abuses against women and girls, raises questions about the suitability of such ownership for games like The Sims and Dragon Age, which are known for their commitment to diverse representation.

Moreover, it is worth noting that Crown Prince Mohammed bin Salman, who leads the Public Investment Fund and effectively governs Saudi Arabia, is widely believed by various international intelligence agencies to have orchestrated the assassination of journalist Jamal Khashoggi in 2018. This significant detail is notably absent from the letter.

The letter emphasizes that the FTC’s 2023 Merger Guidelines clearly indicate that mergers which adversely affect workers, suppress wages, or enable dominant corporations to diminish labor demand could breach antitrust statutes. Given the magnitude of this acquisition and EA’s established dominance within the domestic video game labor market, the authors argue that rigorous scrutiny of the deal is critical.

Additionally, the transaction raises serious issues regarding overlapping leadership and shared ownership among competing gaming publishers. Such intersections increase the likelihood of coordinated anti-labor tactics, including wage suppression and hiring limitations, which could further erode the already fragile bargaining power of workers in this sector.

The authors respectfully implore the Commission to undertake a thorough investigation into the labor market ramifications of this proposed acquisition. This includes assessing EA’s existing wage-setting authority, the potential for post-acquisition layoffs, the concentration of labor markets in relevant geographical and occupational areas, and how cross-ownership may influence labor conditions.

Those following the situation may recall similar concerns raised by the FTC a few years earlier concerning Microsoft’s intended acquisition of Activision Blizzard. The outcome of that situation resulted in significant layoffs and studio closures, prompting observers to reflect on the warnings issued by the FTC.

Given this background, one might anticipate that the Electronic Arts acquisition would face substantial pushback from US regulators. However, the prevailing sentiment suggests the opposite may occur. Former President Donald Trump’s friendly relations with Crown Prince bin Salman, alongside Ferguson’s support of Trump, could facilitate a smoother path for this acquisition.

Furthermore, one of the minority partners in this acquisition, Affinity Partners, is owned by Trump’s son-in-law, Jared Kushner. Historically, the influence of capital has successfully propelled the Microsoft-Activision deal through regulatory channels despite vocal opposition from the FTC. With few barriers now in place, it seems likely that EA’s acquisition will proceed with relative ease, regardless of the numerous respectful letters submitted.