On Wednesday, the Federal Trade Commission flagged Microsoft’s recent Xbox Game Pass pricing overhaul as evidence of the damage caused by their merger with Activision Blizzard has had on consumers. The agency filed a new letter in its appeal in progress from last year’s deal, calling the changes “exactly the type of consumer harm from the merger that the FTC alleged.”
Despite losing his lawsuit seeking a court order The FTC appealed the decision to the U.S. Court of Appeals for the Ninth Circuit, which decided to freeze Microsoft’s purchase of Activision Blizzard in July 2023. While it awaits a final decision from those judges, the FTC has been presenting additional evidence to support its claims that the merger would harm competition in gaming and hurt customers, including a letter earlier this year after Microsoft laid off nearly 2,000 employees on all newly purchased equipment.
Today’s letter (via Games Fray) attempts to use Microsoft’s recent messy changes to Game Pass to bolster its case, pointing to the fact that Game Pass for console will be going away for new and lapsed subscribers and replaced by a more expensive “Standard” package that doesn’t include day-one releases like this fall’s Game Pass. Call of Duty: Black Ops 6, acquired as part of the deal with Activision. The result is that only the Game Pass Ultimate subscription, which now costs $20 per month, will include access to all Game Pass games.
“Microsoft’s price increases and product degradation, combined with Microsoft’s reduced investments in product production and quality through employee layoffs, see FTC Letter dated February 7, 2024, are the hallmarks of a company exercising market power post-merger.” The FTC writesHe also points to a statement Microsoft made in its filings during the trial last summer suggesting that Game Pass wouldn’t be more expensive just because Activision Blizzard games were added.
“In this case, the acquisition would benefit consumers by making (Obligations) available on Microsoft Game Pass on the day of its console launch (with no price increase for the service based on acquisition),” the company wrote at the time. That specific quote He made the rounds in several websitesand has since appeared to contradict itself with this month’s steep price increases, although Microsoft could likely try to argue that it wasn’t the acquisition directly that prompted the overhaul but a broader strategy shift around its subscription services business.
“Microsoft’s post-merger actions thus vindicate Congress’s design to preliminarily halt mergers in order to fully assess their likely competitive effects and judicial skepticism of promises inconsistent with a firm’s economic incentives,” the FTC’s letter concludes. It’s unclear when a final decision on the appeal will be issued, and it’s hard to imagine what the consequences would be if Microsoft were to end up losing. It would certainly be even more complicated and confusing than its Game Pass review.