Gaming firms fined for preventing cross-border sales

26.01.2021

The European Commission has imposed fines totalling 7.8 million euros on Valve, the owner of a global PC gaming platform ‘Steam’, and five publishers: Bandai Namco, Capcom, Focus Home, Koch Media and ZeniMax. The firms were found to have entered into anticompetitive agreements which restricted cross-border sales of around 100 PC video games in Europe (see here and also see our earlier post here). In particular, the publishers requested Valve to set up geographical restrictions and to provide geo-blocked Steam ‘activation keys’, such that users located in one EU country were prevented from activating games purchased elsewhere. The publishers also included contractual export restrictions in their agreements with distributors to prevent them selling games outside their allocated territories.

The practices identified by the Commission are directly contrary to the EU’s digital single market strategy which aims to break down barriers preventing cross-border e-commerce (see our previous post here and here). This latest decision by the Commission acts as a clear warning against any form of so called geo-blocking; EU Commissioner Margrethe Vestager makes clear that “[c]onsumers should not be prevented from shopping around between Member States to find the best available deal.” While the parties argued that, in this case, geo-blocking allowed lower prices to be offered in less-affluent Eastern European countries, the Commission did not consider that this provided justification for the conduct.

This decision also demonstrates that firms may not be able to avoid fines by arguing that they did not instigate the anti-competitive practice. Valve’s defence that it had acted at the request of the publishers, and that as a platform hosting video games it was acting as an agent, did not persuade the Commission. Neither did the fact that the geo-blocked activation keys only applied to 3% of the platform’s featured titles and to none of its own games (see Valve’s press release here). Instead, it is reported that the Commission considered that Valve was a key participant, particularly because the geo-blocking would not have been technically possible without its role. This is certainly not the first time that competition authorities have fined firms who have (at least arguably) been more passive participants of anti-competitive conduct. For example, the CMA recently fined a retailer for the first time in a resale price maintenance investigation, whereas traditionally such investigations have focused on manufacturers who are generally the instigator of such conduct (see here).

This investigation is the latest in a number of developments focusing on cross-border access to digital content. For example, in 2018 the Geo-Blocking Regulation was introduced prohibiting unjustified geographical restrictions in the sale of goods and services within the EU. Further, we have previously commented on the Commission’s investigation into Paramount’s pay-TV geo-blocking licensing practices (see here and here) and the issue was also raised before the UK courts in relation to Premier League broadcasting (see here).

This is an area where we would hope to see more guidance as the law develops, particularly as many cases raise the thorny issue of the relationship between pan-European sales, and IP rights of a national nature. The impact of Brexit will also throw up new issues as parallel UK and EU competition law regimes now apply. In addition, the Geo-Blocking Regulation itself no longer covers sales of goods and services to UK consumers. However, the rules continue to apply to sales to EU customers (even if those sellers are based in the UK). This means that UK businesses who choose to continue to sell to consumers located in the EU, will need to ensure that they do not impose any geo-blocking restrictions as between other EU member states. Restrictions would however be permitted that prevented UK consumers accessing offers to EU consumers, or that prevented EU consumers accessing offers to UK consumers.

Stephen Smith

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Francion Brooks

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Cosima Lumley

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