XBox One's Used Marketplace: Potential Price-Fixing?

Is Microsoft treading dangerous waters by attempting to create a chokehold on pricing for the physical used games market?

From Wikipedia's definition:

Price fixing is an agreement between participants on the same side in a market to buy or sell a product, service, or commodity only at a fixed price, or maintain the market conditions such that the price is maintained at a given level by controlling supply and demand.

The intent of price fixing may be to push the price of a product as high as possible, leading to profits for all sellers but may also have the goal to fix, peg, discount, or stabilize prices. The defining characteristic of price fixing is any agreement regarding price, whether expressed or implied.


Consider what we know so far of Microsoft's plan for the purchase/activation of used games on the XBox One. The purchase price of a new game from a retailer will include a one-time activation code to enable unlimited use of the game after installation on your console. Those who purchase the game secondhand, either from a retailer, an online reseller like Amazon or eBay, or just through a friend, will be required to purchase (at full price) an additional code to unlock that game to play on their own system. This is regardless if they purchased the game as a digital download or as a physical copy of the disc.

That portion in bold is where I believe Microsoft is crossing the line into dangerous ground, and potentially heading towards a conflict with the Better Business Bureau.

Digital distribution is a completely different marketplace from physical product distribution. In a system like XBox Live, PSN, the Apple App Store, Android Market, Nintendo , etc., the prices are set by the service. Customers have no other options for how to acquire the digital versions of those titles; if the game costs $40 for a download, that's the price they have to pay.

But for the physical marketplace, you have multiple options for where to purchase your game. You can choose whether to find a new copy or a used copy. Used merchandise, by definition, is cheaper than new. GameStop has come under fire for charging a "New" price on games whose cases were used as displays. Ethically speaking, you cannot charge full price for a physical copy of an item whose manufacturer's seal has been broken.


Yet Microsoft plans to do precisely that, and I'm proposing the idea that it may very well be a violation of business ethics as enforced through the law.

Microsoft's new plan for the XBox One has one sole purpose: to create a stranglehold on the used games marketplace, a pie that they have wanted a piece of for quite some time. Their intent, however, is not merely to take a piece of it; rather, they want to get as much as they can in order to limit what anyone else can take from it — at least as far as the XBox is concerned.


The entire "Game Activation" system on the XBox One reeks of a design meant to bring in the maximum level of profit from a single copy of a game. The potential profit from the manufacturing of a single game will now go up exponentially for Microsoft if this goes into effect. One copy of any given game could potentially change owners several times; with this new plan, Microsoft seeks to receive full retail profit from every one of those exchanges.

Additionally, this not only affects used game sales, but also the even larger problem of someone not being able to let a friend borrow a game they have paid for. If you own a physical copy of a product, you are legally allowed to let someone borrow it without them having to pay for it. You can let a friend drive your car without them having to pay full blue book value before the engine will start. You can let someone make a phone call on your phone without them having to start their own billing contract with the provider and pay $200 for access to the device.


By engaging in this practice, Microsoft is forcing a stranglehold on the price of all XBox One content. They are eliminating the competition's ability to set their own market prices and remain competitive. All retailers who deal with used XBox One games will be completely reliant on Microsoft's set prices in order to sell their games. This is the very definition of price fixing: creating a system wherein you maximize profits by making it impossible for anyone to challenge your price.

And it is definitely illegal.

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