The Federal Trade Commission (FTC) has expressed concerns over the recent price increases announced by Microsoft for its Xbox Game Pass subscription service tiers. The FTC believes that these price hikes are a form of consumer harm resulting from the merger between Microsoft and Activision. The move to discontinue the $10.99/month Console Game Pass tier and replace it with a $14.99/month Game Pass Standard tier without “day one” access to all first-party titles has raised red flags for the FTC.
The FTC’s letter to the court highlights the issue of “product degradation” caused by a firm exercising market power post-merger. The focus is mainly on the increase in prices for the Game Pass subscription tiers and the lack of day one access to first-party games for Console Game Pass subscribers. To retain this benefit, subscribers will now have to opt for the more expensive Game Pass Ultimate tier, which also offers additional benefits.
One key point of contention is Microsoft’s promise that the addition of Call of Duty to Game Pass’s most expensive tier would not result in a price increase “based on the acquisition.” However, with the recent price changes, the FTC questions whether Microsoft is using inflation as an excuse for the price hikes. While Microsoft has previously adjusted prices to reflect market conditions, the alleged degradation of the Game Pass Standard tier raises concerns about the value subscribers are receiving.
The FTC’s letter also references Microsoft’s layoffs in the Xbox division, suggesting that these actions indicate reduced investments in output and product quality post-merger. As the legal battle between the FTC and Microsoft continues, the implications of the merger on consumer welfare and market competition remain under scrutiny.
While Microsoft may have justifications for its pricing changes, the FTC’s concerns about consumer harm and product degradation are significant. As the appeal process unfolds, the impact of these price hikes on Xbox Game Pass subscribers and the broader gaming market will be closely monitored. Microsoft’s response to these allegations and its efforts to address the FTC’s concerns will be crucial in determining the outcome of this ongoing dispute.
