Update, July 20, 2024: Xbox hit back at the FTC, saying it was “wrong” and “misleading” to call its revised Xbox Game Pass tiers “downgraded” and saying the Commission “barely mentions [concerns about] subscription[s] on trial’.
“Earlier this month, Microsoft announced changes to its gaming subscription service, Game Pass, to provide consumers with valuable options at various price points,” Xbox said in court documents filed yesterday, Friday, July 19.
“Microsoft is offering a new level of service, Game Pass Standard, which offers access to hundreds of games from the back catalog and multiplayer functionality for S14.99/month.
“Calling this a ‘degraded’ version of the discontinued Game Pass console offering is a misnomer.” This discontinued product did not offer multiplayer functionality, which had to be purchased separately for an additional $9.99/month (making the total price $20.98/month).
“While the price of Game Pass Ultimate will increase from $16.99 to $19.99/month, the service will offer more value through many new games available ‘day and date.’ Among them is the upcoming release of Call of Duty, which has never before been available on a subscription day and date.”
“The FTC barely mentioned the subscription during the trial, instead focusing on the theory that Microsoft would keep Call of Duty from Sony’s console. The district court correctly rejected that theory, which is now further undermined by Microsoft and Sony’s ten-year agreement to retain Call of Duty for PlayStation, a contract that Sony was ‘thrilled’ to enter into.”
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Microsoft also said that the FTC has now retrospectively “displaced[ed] focus’ to its subscription service.
“Leaving aside that it is common for businesses to change the services offered over time, the FTC’s case in all of its purported markets has always been based on vertical foreclosure, ie. that Microsoft will withhold Call of Duty from competitors and therefore harm competition,” Microsoft continues.
“But even in the purported subscription market, Call of Duty isn’t holding back on anyone who wants it. And there’s no evidence of competitive harm: Sony’s subscription service continues to thrive, even though they release few new games on their subscription day-and-date, unlike Microsoft.
“Thus, the deal continues to benefit competition and consumers—exactly what the district court correctly found.”
The original story follows.
Original story: The Federal Trade Commission (FTC) has slammed Microsoft’s changes to Xbox Game Pass tiers as an “inferior product,” citing that by “removing the most valuable games from Microsoft’s new service,” Microsoft has delivered “exactly such harm to consumers from merger FTC claims”.
Microsoft confirmed sweeping changes — including price hikes — to its Xbox Game Pass subscription service earlier this month. The changes come ahead of the October release of Call of Duty: Black Ops 6, which will include the removal of day one editions for its core overhauled tier.
The FTC’s filing with the U.S. Court of Appeals for the Ninth Circuit added that Microsoft’s announcement showed why it was necessary to “halt the mergers to fully assess their likely competitive effects” and was “inconsistent” with what Microsoft said when the FTC initially stepped in to prevent its acquisition of Activision Blizzard.
“The product degradation — the removal of the most valuable games from Microsoft’s new service — combined with the price increases for existing users is exactly the kind of harm to consumers from the merger that the FTC alleges,” the filing said.
“Microsoft’s price increases and product quality declines—combined with Microsoft’s reduced investment in manufacturing and product quality through layoffs—are the hallmarks of a company exercising market power post-merger.”
“Microsoft promised that “the acquisition will benefit consumers by making [Call of Duty] available on Microsoft’s Game Pass the day it’s released on console (no price increase for the service based on acquisition)”.
Earlier this year, the FTC said the planned layoffs of 1,900 people at Xbox and Activision Blizzard contradict what it said in court last year about how Activision would remain structurally independent.
“By continuing to oppose the deal, the FTC ignores the reality that the deal itself has changed substantially,” a Microsoft spokesperson said in a statement to Eurogamer at the time.
“Because the Federal Trade Commission lost in court last July, Microsoft was required by the UK competition authority to restructure the acquisition globally and therefore did not acquire the cloud streaming rights to Activision Blizzard’s games in the United States.” Additionally, Sony and Microsoft signed a binding agreement to keep Call of Duty on PlayStation on even better terms than Sony had before.”
