On Wednesday, the Federal Trade Commission pointed to Microsoft’s recent pricing overhaul of Xbox Game Pass as evidence of the harm its merger with Activision Blizzard has had on consumers. The agency filed a new letter in its ongoing appeal of last year’s deal, calling the changes “exactly the sort of consumer harm from the merger that the FTC alleged.”
Despite losing its lawsuit seeking an injunction to freeze Microsoft’s purchase of Activision Blizzard in July 2023, the FTC appealed the decision with the U.S. Court of Appeals for the Ninth Circuit. While it awaits a final decision from those justices, the FTC’s been filing additional evidence to support its claims that the merger would hurt competition in gaming and hurt customers, including a letter from earlier this year after Microsoft laid off nearly 2,000 employees across the newly acquired teams.
Today’s letter (via Games Fray) tries to use Microsoft’s recent messy changes to Game Pass to support its case, pointing to the fact that Game Pass for Console is going away for new and lapsed subscribers and will be replaced by a more expensive “Standard” bundle that doesn’t include day-one releases like this fall’s Call of Duty: Black Ops 6, acquired as part of the Activision deal. The result is that only the Game Pass Ultimate subscription, which is now $20 a month, will include access to all Game Pass games.
“Microsoft’s price increases and product degradation—combined with Microsoft’s reduced investments in output and product quality via employee layoffs, see FTC’s February 7, 2024, Letter—are the hallmarks of a firm exercising market power post-merger,” the FTC writes. It also points to a statement Microsoft made in its filings during the trial last summer suggesting Game Pass wouldn’t get more expensive just because Activision Blizzard’s games were added to it.
“Here, the acquisition would benefit consumers by making [Call of Duty] available on Microsoft’s Game Pass on the day it is released on console (with no price increase for the service based on the acquisition),” the company wrote at the time. That specific quote made the rounds on several websites, and has since appeared to be contradicted by this month’s steep price increases, though Microsoft could probably try to argue that it wasn’t the acquisition directly that spurred the overhaul but a larger strategy shift around its subscription service business.
“Microsoft’s post-merger actions thus vindicate the congressional design of preliminarily halting mergers to fully evaluate their likely competitive effects, and judicial skepticism of promises inconsistent with a firm’s economic incentives,” the FTC’s letter concludes. It’s not clear when a final decision in the appeal will be issued, and it’s hard to fathom what the consequences would be if Microsoft ended up losing. It would no doubt be even messier and more confusing than its Game Pass overhaul.