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The FTC criticises the Xbox Game Pass price hike, calling it harmful to consumers

FTC criticises Microsoft's Xbox Game Pass price hike, citing consumer harm from the Activision Blizzard merger and competition concerns.

On Wednesday, the Federal Trade Commission (FTC) highlighted Microsoftโ€™s recent price increase for Xbox Game Pass as evidence of the negative impact its merger with Activision Blizzard has had on consumers. The agency filed a new letter in its ongoing appeal of last yearโ€™s merger, describing the changes as โ€œexactly the sort of consumer harm from the merger that the FTC alleged.โ€

The FTC’s ongoing appeal against Microsoft

After losing its lawsuit to halt Microsoftโ€™s purchase of Activision Blizzard in July 2023, the FTC appealed the decision to the U.S. Court of Appeals for the Ninth Circuit. While awaiting a final decision, the FTC has submitted additional evidence to bolster its claims that the merger would hurt competition in the gaming industry and disadvantage customers. This includes a letter from earlier this year after Microsoft laid off nearly 2,000 employees across its newly acquired teams.

Todayโ€™s letter, reported by Games Fray, supports its case by pointing to Microsoftโ€™s recent changes to Game Pass. It notes that Game Pass for Console is discontinued for new and returning subscribers. It will be replaced by a more expensive โ€œstandardโ€ bundle that excludes day-one releases like the upcoming Call of Duty: Black Ops 6, acquired through the Activision deal. Consequently, only the Game Pass Ultimate subscription, now priced at $20 per month, will include access to all Game Pass games.

FTC’s arguments on consumer harm

โ€œMicrosoftโ€™s price increases and product degradationโ€”combined with reduced investments in output and product quality via employee layoffsโ€”are the hallmarks of a firm exercising market power post-merger,โ€ the FTC stated. The agency also referenced a statement Microsoft made during the trial last summer, suggesting Game Pass wouldnโ€™t become more expensive just because Activision Blizzardโ€™s games were added.

โ€œHere, the acquisition would benefit consumers by making [Call of Duty] available on Microsoftโ€™s Game Pass on the day it is released on console (with no price increase for the service based on the acquisition),โ€ Microsoft wrote at the time. This statement was widely circulated and has since contradicted the recent price hikes. Microsoft may argue that the price increase was part of a broader strategy shift for its subscription service business rather than a direct result of the acquisition.

Potential implications of the appeal

โ€œMicrosoftโ€™s post-merger actions thus vindicate the congressional design of preliminarily halting mergers to evaluate their likely competitive effects fully and judicial scepticism of promises inconsistent with a firmโ€™s economic incentives,โ€ the FTCโ€™s letter concludes. The timeline for a final decision in the appeal is unclear, and the potential consequences if Microsoft loses the appeal could be significant. The situation would likely become even more complex and confusing than the current Game Pass overhaul.

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