In January 2022, Microsoft announced that it would acquire the gaming giant Activision Blizzard. Many objections were raised against this acquisition, primarily from Sony. However, market regulators feared that such a large player could emerge in the gaming market, which would have disadvantages for the customers. In October 2023, the deal worth $75.4 billion went through nonetheless. Yet, a regulatory authority still refuses to accept it. They criticize the price increases in the Xbox Game Pass.
Who wants to reverse the deal? The Federal Trade Commission (FTC) is an independent federal agency of the USA. The agency’s task is to combat unfair practices to ensure that a market functions through healthy competition among companies.
It is basically the antitrust authority of the USA.
This is what the FTC sees as the problem with the deal: The FTC had already filed an objection against the deal in December 2022, sued against it, and filed an appeal with the appellate court after the initial lawsuit failed.
In February 2024, they felt confirmed in their objection about how harmful the deal was, when Microsoft cut 2,000 jobs at Activision Blizzard.
Now they feel again confirmed in their objection. They believe that Microsoft is exploiting its now dominant position in the market to raise prices in the Xbox Game Pass.
Call of Duty is repeatedly a bone of contention regarding the deal:
US Authority Sees Effective Price Increase in Xbox Game Pass of Up to 81%
This is their new complaint: In a submission to the appellate court dated July 18, it is now stated (via twitter):
- Microsoft is increasing its prices from $16.99 to $19.99 per month – a price increase of 17%
- Additionally, they would discontinue the Console Game Pass for €10.99 and transition people to a Game Pass Ultimate – which represents a price increase of 81%
- Or people could switch to a “Game Pass Standard” for $14.99 – which involves a price increase of 36% and transitioning to a worse product, as the Day-One releases, the “most valuable games” would be missing
The FTC says: These price increases and the layoffs are clear indications that the company is exploiting its increased market power from the merger. Moreover, they do not align with the statements Microsoft made prior to the merger:
Microsoft had assured that the merger would benefit customers, as Xbox Game Pass customers could, for instance, play the new Call of Duty (from Activision Blizzard) on day one – without a price increase.
That is no longer the case, as one can only play the new CoD by paying the increased price.
Will Activision Blizzard be Free Again?
What happens next? No one knows. It is unclear when the appellate court will decide and what a ruling could mean.
“Reversal of a merger” is very rare (via polygon). In 2009, two grocery chains merged but lost their appeal against the merger. Ultimately, they had to give up 32 stores and a brand name.
Update 21.7., 12:11 PM: Meanwhile, a response from Microsoft has been received. They have also written to the appellate court and disputed the FTC’s letter: Microsoft reacts sharply to the complaint against the purchase of Activision Blizzard due to changes in the Xbox Game Pass
