I wonder how this can even be legal in Europe. If someone sold you something, its yours. AFAIK, There is enough consumer protection to stop most EULA bullshit. So it seems it only needs someone to sue and some proof microsoft used the word 'sold' when you bought it.
I doubt the law requires anything more than the full refund which MS is providing. Similarly, if someone sells you a physical product that is faulty, the seller is not required to produce a replacement, they can just refund you instead.
Hitting the Molly Switch on a DRM service is the exact opposite.