Gamers owe Lina Khan an apology after Microsoft price hikes

The viral meme circulating social media tells the story perfectly: a long line of people waiting to "Apologize to LINA KHAN" while an empty booth sits beside it offering "Join Game Pass with new prices." Former FTC Chair Lina Khan was right all along about the Microsoft-Activision merger, and the gaming community owes her an apology.

In March 2023, Microsoft submitted court filings stating unequivocally that Game Pass prices would not increase as a result of the Activision Blizzard merger. Khan's FTC challenged the $69 billion acquisition, warning that Microsoft would raise prices and harm competition. A federal judge rejected the FTC's challenge on July 10, 2023. Now, two years later, Microsoft has implemented exactly the price increases and service degradation Khan predicted.

"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 wrote in court filings reviewed by TweakTown.

The statement left little room for interpretation. Microsoft explicitly promised no price increases would result from adding Activision Blizzard's substantial game catalog to Game Pass. In a separate filing addressing UK regulators' concerns, Microsoft stated: "Game Pass prices will not increase as a result of the Merger, and certainly will not increase to a point that offsets the substantial benefits of Activision titles coming to Game Pass on a day and date basis."

Khan was right: The FTC's vindication

The Federal Trade Commission filed a letter with the U.S. Court of Appeals for the 9th Circuit in July 2024 highlighting Microsoft's actions following the merger. The regulatory agency pointed to both price increases and what it termed "product degradation" as evidence of market power being exercised post-merger.

"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 wrote in its filing.

Khan's FTC specifically called out Microsoft's introduction of a new "degraded" Xbox Game Pass Standard tier alongside price increases. The regulatory body argued these changes directly contradicted Microsoft's court statements suggesting Game Pass wouldn't become more expensive simply because Activision Blizzard games were added to the service.

In its filing, the FTC noted: "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."

Microsoft responded to the FTC's characterization on July 19, 2024, according to Tom Warren's reporting. The company called the FTC's letter a "misleading, extra-record account of the facts" and disputed the claim that Game Pass Standard represented a "degraded product" because it included multiplayer functionality.

The broken promises pile up

The price increases came alongside workforce reductions that further undermined Microsoft's merger representations. In February 2024, the company eliminated 1,900 Activision Blizzard and Xbox employees. Microsoft had previously indicated during court proceedings that vertical acquisitions like the Activision deal wouldn't result in layoffs from workforce redundancies—another prediction Khan got right.

The company conducted additional layoffs throughout 2024, including closing several game studios in May and reducing HoloLens and Azure cloud teams by 1,000 positions in June. In September, another 650 Xbox employees faced elimination as part of ongoing integration efforts following the Activision Blizzard acquisition.

By July 2025, Microsoft announced 9,000 job cuts affecting Xbox, King, ZeniMax Studios, Turn 10, Raven Software, and Sledgehammer Games. The widespread reductions prompted industry observers to question Xbox's long-term strategy and viability as a console manufacturer.

Then, in October 2025, Microsoft implemented another major Game Pass restructuring. The company announced on October 1, 2025 that Game Pass Ultimate would increase 50% to $29.99 per month, up from $19.99. This represented the second price increase in under two years—Microsoft had raised Ultimate from $16.99 to $19.99 in 2024.

October 2025: Khan's warnings materialize

On October 1, 2025, Microsoft restructured its entire Game Pass lineup, introducing three renamed tiers: Essential (formerly Core), Premium (formerly Standard), and Ultimate. The company increased Ultimate pricing by 50%, from $19.99 to $29.99 per month. PC Game Pass rose from $11.99 to $16.49 monthly.

According to Microsoft's announcement, the price changes reflected "expanded catalog, new partner benefits, and upgraded cloud gaming experience." The company added Fortnite Crew (valued at $11.99 monthly) and Ubisoft+ Classics ($7.99 monthly value) to the Ultimate tier, along with enhanced cloud gaming quality up to 1440p.

Microsoft director of gaming and platform communications Dustin Blackwell told The Verge: "We understand price increases are never fun for anybody, but we're trying to reinforce by adding more value to these plans as well. It's something we don't take lightly, and we're listening to the feedback of players and the community to try to provide them with more of what they're asking for."

The timing proved particularly notable. Microsoft announced the Ultimate price increase just weeks before Call of Duty: Black Ops 7's November release—the first Call of Duty title available on Game Pass at launch following the Activision Blizzard acquisition. Gaming news outlet GameSpot reported that the 50% increase came "just ahead of Call of Duty: Black Ops 7's release in November."

The announcement generated substantial backlash across gaming communities. YouTuber Mightykeef and thousands of users noted this decision came after Microsoft raised Xbox Series X/S console prices earlier in 2025, marking the second hardware price increase that year. Many gamers began acknowledging they should have listened to Khan's warnings.

Multiple retailers, including GameStop, initially continued selling prepaid Game Pass Ultimate codes at the previous $19.99 monthly rate, allowing subscribers to extend their memberships at the old pricing by stacking codes up to Microsoft's 36-month limit. Amazon maintained the older rate for one-month and three-month codes temporarily following the announcement.

What Microsoft promised versus what Khan predicted

Microsoft pointed to its earlier ZeniMax Media acquisition as evidence it wouldn't raise Game Pass prices after adding major content. "This is exactly what Microsoft has done when it has added content to Game Pass in the past with, for example, the ZeniMax transaction resulting in additional content but no increase in Game Pass subscription prices," the company stated in filings to UK regulators.

The October 2025 price restructuring demonstrated the opposite pattern. Following the Activision acquisition, Microsoft not only raised prices substantially but created a more complex tier structure. The Premium tier would receive first-party Xbox titles within a year of launch, except for Call of Duty—which remained exclusive to the now-$29.99 Ultimate tier.

The company argued that increasing Game Pass prices "would be counter-productive as it would increase subscriber churn rates" and noted that subscribers could cancel at any time after a month of play. Microsoft suggested that because Call of Duty titles release only once yearly, any price impact would be "short-lived as gamers who exhaust their enthusiasm for the new version of CoD within a few months will churn because of the higher price."

Khan's FTC had warned about all of this. The regulatory agency predicted Microsoft would use its market power to raise prices and degrade service quality once the merger closed. Every prediction came true.

The courts failed consumers

Judge Jacqueline Scott Corley of the Northern District of California denied the FTC's request for a preliminary injunction against the Microsoft-Activision merger on July 10, 2023. The decision allowed the $69 billion transaction to proceed despite Khan's regulatory warnings about potential anticompetitive effects in gaming console and subscription service markets.

The FTC appealed the decision, arguing the court failed to adequately consider Microsoft's incentives to engage in anticompetitive conduct following the acquisition. Khan's regulatory agency maintained its position that Microsoft would have both the ability and incentive to make Activision games exclusive to Xbox platforms or degrade the experience on rival PlayStation consoles.

Microsoft's statement to the courts emphasized that Game Pass would "continue to be constrained by B2P [buy to play]," suggesting traditional game purchases would limit any pricing power the company might gain from adding Activision content to its subscription service. This constraint proved illusory.

On May 7, 2025, the U.S. Court of Appeals for the Ninth Circuit ruled in Microsoft's favor, rejecting Khan's FTC challenge to the Activision Blizzard acquisition. The appellate court upheld the lower court's decision denying the preliminary injunction. Following this defeat, the FTC dropped its administrative case against the merger on May 22, 2025, effectively ending the regulatory challenge.

Five months later, Microsoft implemented the exact price increases Khan warned about.

Why this matters beyond gaming

The Microsoft-Activision case represents a significant test of regulatory authority in technology markets. Khan's FTC warned specifically that Microsoft would raise prices and degrade service quality if the acquisition proceeded. Microsoft made explicit promises to the contrary. The subsequent events have validated Khan's concerns while undermining the credibility of Microsoft's representations.

"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," wrote Timothy Geigner for Techdirt. "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."

The case raises fundamental questions about merger review processes and the weight courts should give to acquiring companies' representations about post-merger conduct. If companies can make specific promises to gain merger approval and then take contrary actions without consequence, the effectiveness of antitrust enforcement becomes questionable.

Geigner noted: "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."

Khan's concerns about market consolidation and pricing power extend beyond gaming. The former FTC Chair noted that "increasing market consolidation and increasing prices often go hand-in-hand" across sectors. Khan highlighted Microsoft's acquisition of Activision as an example where significant price hikes and layoffs followed consolidation, "harming both gamers and developers."

The pattern repeats across industries

The gaming industry has experienced considerable consolidation in recent years, with major publishers acquiring development studios and platforms seeking exclusive content. Gaming measurement standardization has become increasingly important as the sector attracts more advertising investment, with over 80% of U.S. internet users identifying as gamers.

Subscription services across industries have followed similar patterns of initial underpricing to build subscriber bases, followed by significant price increases once market positions are established. Apple TV+ raised its monthly subscription price to $12.99 from $9.99 in August 2025, marking a 30% increase. YouTube Premium implemented substantial price increases ranging from 10% to over 50% across multiple countries in 2023.

The UK Competition and Markets Authority had raised concerns in its provisional findings that "Prices for subscriptions can easily be revised, and Microsoft may have an incentive to do so once it adds content that is as popular as Activision's, including CoD." The CMA suggested Microsoft might find price increases attractive after securing popular Activision content for Game Pass. Khan's FTC made similar predictions—and both were proven correct.

Microsoft countered these concerns by arguing it would need to offer Game Pass at a "lower quality-adjusted price" to increase output following the merger. The company claimed the integration would result in "a classic elimination of double marginalization effect because Microsoft will be able to acquire these games at (opportunity) cost and will have incentives to distribute them more broadly."

These promises evaporated once the merger closed.

The gaming community's reckoning

Microsoft's response to the FTC's July 2024 letter disputed the characterization of Game Pass Standard as "degraded." The company pointed to the inclusion of multiplayer functionality as evidence the tier provided value to subscribers. However, the creation of multiple tiers with different feature sets and pricing structures represents a fundamental change from the service Microsoft described to regulators during merger review—exactly what Khan warned would happen.

The company's statements about subscriber churn and cancellation flexibility assumed consumers would make rational economic decisions based on Game Pass value relative to alternatives. In practice, subscription services benefit from inertia, with many subscribers maintaining services even when prices increase beyond their perceived value.

Microsoft suggested that Game Pass users are "price sensitive" and that price increases would affect all users, including those who "do not value or play CoD." This reasoning implied the company would avoid broad price increases that might alienate subscribers uninterested in Call of Duty specifically. The October 2025 price restructuring proved otherwise.

The arguments presented to regulators emphasized constraints on Microsoft's pricing power, including competition from traditional game purchases and the need to maintain subscriber growth. The company's post-merger actions demonstrate these constraints proved less binding than represented to courts and regulatory agencies—precisely as Khan's FTC predicted.

What Khan knew that the courts ignored

The FTC's February 7, 2024 letter to the court highlighted workforce reductions as another area where Microsoft's post-merger conduct contradicted representations made during regulatory review. Khan's agency argued these layoffs demonstrated reduced investment in output and product quality following the acquisition.

Microsoft's internal communications about the layoffs drew criticism for apparent disconnect from their severity. Xbox head Phil Spencer told employees the company had "more players, games, and gaming hours than ever before" and claimed the "platform, hardware, and game road map has never looked stronger" even while announcing thousands of job cuts.

The combination of price increases, service tier changes, and workforce reductions formed the basis for Khan's FTC argument that Microsoft was exercising market power post-merger in ways that harmed consumers and industry participants. The regulatory agency maintained these outcomes validated its original concerns about the transaction's competitive effects.

As of May 2025, the administrative proceeding before the FTC was closed following the appellate court's decision in Microsoft's favor. The FTC's case file number 2210077 shows a status of "Closed" with the last update dated May 22, 2025.

Khan was proven right on every count. The gaming community owes her an apology.

Timeline

• December 8, 2022: FTC files complaint seeking to block Microsoft's $69 billion acquisition of Activision Blizzard
• March 8, 2023: Microsoft tells UK regulators Game Pass prices "will not increase as a result of the Merger"
• March 2023: Microsoft files court documents stating acquisition would provide Game Pass benefits "with no price increase for the service based on the acquisition"
• July 10, 2023: Federal judge denies FTC's preliminary injunction request, allowing merger to proceed
• October 13, 2023: Microsoft completes Activision Blizzard acquisition
• January 2024: Microsoft eliminates 1,900 Activision Blizzard and Xbox employees
• February 7, 2024: FTC files letter highlighting Microsoft layoffs contradicting merger representations
• May 2024: Microsoft closes several game studios
• June 2024: Microsoft reduces HoloLens and Azure cloud teams by 1,000 positions
• July 2024: FTC files letter calling new Game Pass Standard tier "degraded" and citing price increases as evidence of post-merger market power exercise
• July 19, 2024: Microsoft responds, calling FTC's letter "misleading" and disputing "degraded product" characterization
• September 2024: Microsoft eliminates 650 Xbox employees
• May 7, 2025: U.S. Court of Appeals for Ninth Circuit rules in Microsoft's favor on FTC appeal
• May 22, 2025: FTC drops administrative case against Microsoft-Activision merger
• July 2, 2025: Microsoft announces 9,000 job cuts across Xbox and acquired studios
• October 1, 2025: Microsoft increases Game Pass Ultimate price 50% to $29.99/month, restructures tiers to Essential, Premium, and Ultimate

Summary

Who: Lina Khan's Federal Trade Commission, Microsoft Corporation, Activision Blizzard, Judge Jacqueline Scott Corley, and the U.S. Court of Appeals for the Ninth Circuit.

What: Lina Khan's FTC warned that Microsoft's $69 billion acquisition of Activision Blizzard would lead to price increases and service degradation. Microsoft promised courts that Game Pass prices would not increase as a result of the merger. Following the acquisition's completion in October 2023, Microsoft raised prices multiple times (including a 50% increase to $29.99 monthly in October 2025), introduced degraded service tiers, and conducted multiple rounds of layoffs affecting thousands of employees—vindicating every warning Khan made and proving her predictions correct.

When: Khan's FTC challenged the merger in December 2022. Microsoft made its no-price-increase promises in court filings in March 2023. A federal judge denied the FTC's preliminary injunction request on July 10, 2023. The merger completed in October 2023. Layoffs began in January 2024. The FTC filed letters highlighting contradictions in February and July 2024. The appellate court ruled in Microsoft's favor on May 7, 2025, and the FTC closed its case on May 22, 2025. Microsoft implemented a 50% Game Pass Ultimate price increase on October 1, 2025—proving Khan right.

Where: The legal proceedings took place in the Northern District of California and the U.S. Court of Appeals for the Ninth Circuit. The business actions affected Microsoft's gaming operations globally, with particular impact on employees at Activision Blizzard studios and Xbox divisions in the United States. The price increases affected gamers worldwide.

Why: Khan's FTC challenged the merger based on concerns that Microsoft would gain control of popular gaming franchises and use that control to harm competition in console and subscription service markets through price increases and service degradation. Microsoft made explicit promises about maintaining Game Pass pricing to address these concerns. The subsequent price increases and service changes vindicated Khan's predictions entirely. The case demonstrates the limitations of merger enforcement when courts fail to credit regulatory warnings and accept corporate promises at face value—leaving consumers to pay the price when those promises prove false.