Earlier this month, Microsoft quietly announced a price increase for Game Pass subscriptions, as well as the removal of Xbox Game Pass Console in favor of Xbox Game Standard. In addition to widespread outcry from gamers, the FTC has since taken up the case to attack Microsoft again, after months of blocking the company from acquiring Activision Blizzard King.
Read also: Price increases, day one games with conditions… Is Xbox sabotaging Game Pass?
Microsoft responds to FTC accusations regarding Xbox Game Pass
In a document In a lawsuit filed with the U.S. Court of Appeals for the Ninth Circuit, the Federal Trade Commission (FTC) last week denounced the price increase of Xbox Game Pass and called the new Xbox Game Pass Standard subscription a “degraded product” because Game Pass members can no longer sign up for Xbox Game Pass Console, which includes access to day one games in the service.
Microsoft's price increases and product degradation – combined with Microsoft's reduction in investment in production and product quality through layoffs – are hallmarks of a company exercising market power after the merger.
Unsurprisingly, Microsoft was quick to respond to these accusations. In a new letter In a written submission to Molly C. Dwyer of the U.S. Court of Appeals for the Ninth Circuit, Rakesh Kilaru of the law firm Wilkinson Stekloff called the FTC's statements “a misleading and extra-record account of the facts” that “constitutes an attempt by the agency to reinvent its case on appeal.”
Microsoft believes that Xbox Game Pass Standard is not a “degraded” version of the Console tier in that it allows for multiplayer features.
Microsoft's response in French
The FTC's Rule 28(j) letter presents a misleading and extraneous account of the facts and constitutes an attempt by the agency to reinvent its case on appeal.
Earlier this month, Microsoft announced changes to its gaming subscription service, Game Pass, to give consumers valuable options at different price points. Microsoft is offering a new tier of service, Game Pass Standard, which provides access to hundreds of retro catalog games and multiplayer functionality for $14.99/month. It’s incorrect to call this a “downgraded” version of the discontinued Game Pass for Console offering. That discontinued product did not offer multiplayer functionality, which had to be purchased separately for an additional $9.99/month (bringing the total cost to $20.98/month). While the price of Game Pass Ultimate is increasing from $16.99 to $19.99/month, the service will offer more value with many new games available “day-and-date.” Among them is the upcoming release of Call of Duty, which has never been available as a day-and-date subscription.
The FTC barely mentioned subscription in the lawsuit, focusing instead on the theory that Microsoft would withhold Call of Duty from Sony consoles. Ans. Br. 18-19, 26-27. The district court correctly rejected that theory, now further eroded by Microsoft’s decade-long deal with Sony to keep Call of Duty on PlayStation—a deal Sony was “thrilled” to enter into.1 While the FTC has now tried to shift its focus to its supposed subscription market, its letter doesn’t square with its arguments below. Aside from the fact that it’s common for companies to change their service offerings over time, the FTC’s case in all of its alleged markets has always been based on vertical exclusion, that is, that Microsoft would withhold Call of Duty from rivals and thus harm competition. But even in the supposed subscription market, Call of Duty isn’t being withheld from anyone who wants it. See Sealed Ans. Br.24-25, 42. And there is no evidence of harm to competition: Sony's subscription service continues to thrive, even though it offers few new games in its day-and-date subscription, unlike Microsoft.
The transaction thus continues to benefit competition and consumers – exactly what the district court correctly found.
Respectfully submitted,
Rakesh Kilaru
What impact for Xbox?
As stated by The Vergethe FTC's request is part of its appeal of the court's decision not to block Microsoft's acquisition of Activision-Blizzard.
While the merger was validated last October, the court has not yet ruled on the FTC's appeal, and it is hard to imagine it coming back to the subject anyway. This could also be detrimental to Microsoft, particularly in the context of potential new acquisitions.
With its recent decisions, the company has indeed proven that its promises cannot really be believed, as evidenced for example by this statement affirming that the price of the Xbox Game Pass would not increase following the acquisition of Activision-Blizzard, while it has increased by almost 40% since then.