Late last year, the FTC appealed the decision by the court to allow Microsoft’s acquisition of Activision Blizzard to go through by denying the FTC’s requested injunction against it. Since then, Microsoft appears to be running some sort of experiment to see just how completely it can prove the FTC’s warning about the deal was correct as possible, while also proving just how fully it lied to the courts during those proceedings. It started with a round of post-acquisition layoffs Microsoft conducted, including at the studios it acquired through the deal. During court proceedings, Microsoft indicated that the injunction wasn’t necessary, as the type of vertical acquisition it was pursuing in this case wouldn’t result in layoffs borne of redundancies in the workforce as happens often with other mergers. Then it laid people off due to “areas of overlap” anyway.
Well, Microsoft also told the courts back then that the acquisition would not result in price hikes or other fuckery with Xbox’s Game Pass subscriptions. Recall that regulators throughout the world, including the FTC, made a ton of noise about the cloud-based offerings of Microsoft as part of all of this. Here’s what Microsoft said back then.
“The acquisition would benefit consumers by making Call of Duty 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), on Nintendo, and on other services that allow cloud streaming,” Microsoft writes in the court filing (via TweakTown).
That statement is remarkably clear. No price increases for Game Pass as a result of the acquisition. Well, there must be an immense amount of coincidence then, as Microsoft has just announced changes to Game Pass that include enshittification of existing plans and price raises to boot. And the FTC is pointing out to the court that this is exactly what it warned would happen.
“Microsoft’s price increases and product degradation—combined with Microsoft’s reduced investments in output and product quality via employee layoffs, see FTC’s February 7, 2024, Letter—are the hallmarks of a firm exercising market power post-merger,” the FTC writes. It also points to a statement Microsoft made in its filings during the trial last summer suggesting Game Pass wouldn’t get more expensive just because Activision Blizzard’s games were added to it.
“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,” the FTC’s letter concludes. It’s not clear when a final decision in the appeal will be issued, and it’s hard to fathom what the consequences would be if Microsoft ended up losing. It would no doubt be even messier and more confusing than its Game Pass overhaul.
You can read the rest of the letter embedded below, but this is about as good a test case as I could come up with in a lab to see if the courts will allow regulators in America to have any teeth at all. The FTC warned that Microsoft would do exactly as it has done if the acquisition went through. Microsoft said it wouldn’t. The FTC has been proven right and Microsoft has been proven a liar.
For all of that to result in no penalty from the courts is to tell every company in the country that it can flat-out lie to the courts to get an acquisition approved and rest easy knowing the courts won’t un-ring that bell if they succeed.
