While on the surface the biggest obstacle for Microsoft amidst the Activision Blizzard deal would be PlayStation, the true adversary in this acquisition battle was the Federal Trade Commission (FTC). It was revealed through a lawsuit that the government body filed for the firm’s handling of this $70 billion purchase. Of course, it was not effective in the long run against the Xbox firm.

In fall 2023, Microsoft officially outpaced the lawsuit filed by the FTC and successfully acquired Activision Blizzard King. However, some issues did hold water in terms of the handling from Microsoft in term of prior acquisitions. Looking at the Bethesda deal, the FTC issued that scrutiny should be held high against Microsoft with little plans to explore more multiplatform support as initially promised.

And yet again, the FTC is back with yet another issue that rightfully counters Microsoft’s actions. Recently, the Xbox firm announced new pricing for Xbox Game Pass in which the FTC has now responded in a new filing revealing the counterintuitive response that Microsoft was championing during the trails for its Activision deal, thanks @games_fray.

The Federal Trade Commission writes to alert the Court to Microsoft’s announced price increases in the multi-game-subscription and cloud-gaming markets,1 which the district court found relevant to the merger analysis. Microsoft is raising the price for its “Game Pass Ultimate” product from $16.99/month to $19.99/month—a 17% year-over-year increase.

Additionally, Microsoft is discontinuing its $10.99/month “Console Game Pass” product. Users of that product must pay 81% more to switch to “Game Pass Ultimate.” For consumers unwilling to pay 81% more, Microsoft is introducing a degraded product, “Game Pass Standard,” at $14.99/month. This product costs 36% more than Console Game Pass, and withholds day-one releases. Product degradation—removing the most valuable games from Microsoft’s new service—combined with price increases for existing users, is exactly the sort of consumer harm from the merger the FTC has alleged.

Imad Abyad, Federal Trade Commission Counsel

“Microsoft’s price increases and product degradation—combined with Microsoft’s reduced investments in output and product quality via employee layoffs […] are the hallmarks of a firm exercising market power post-merger. […] Microsoft is hiking the price of Xbox Game Pass Ultimate and launching a new ‘Standard’ tier prices for consumers, including decreased product quality and reduced innovation”).

“Importantly, Microsoft’s actions are inconsistent with Microsoft’s representations below. Microsoft’s price increases coincide with adding “Call of Duty” (CoD) to Game Pass’s most expensive tier, and discontinuing the Console tier will happen shortly before releasing CoD’s newest game.

“Below, Microsoft promised that ‘the acquisition would benefit consumers by making [CoD] 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).’ 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.”

Are you behind the FTC’s newest filing against Microsoft?

Source: Federal Trade Commission