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Valve and 5 Publishers Under EU Anti-trust Investigation

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The European Commission has informed Valve, owner of the “Steam” video game distribution platform, and five videogame publishers, of its preliminary view that the companies prevented consumers from purchasing videogames cross-border from other Member States, in breach of EU competition rules.

Commissioner Margrethe Vestager, in charge of competition policy, said: "In a true Digital Single Market, European consumers should have the right to buy and play video games of their choice regardless of where they live in the EU. Consumers should not be prevented from shopping around between Member States to find the best available deal. Valve and the five PC video game publishers now have the chance to respond to our concerns."

The Commission has addressed Statements of Objections to Valve, owner of the world's largest PC video game distribution platform called “Steam”, and five PC video game publishers, Bandai Namco, Capcom, Focus Home, Koch Media and ZeniMax.

Valve – via Steam – digitally distributes PC video games from each of the five PC video game publishers concerned by the investigation. At the same time, Valve provides "activation keys" to these publishers.

These “activation keys” are required for consumers to play a number of PC video games bought on channels other than Steam, i.e. downloaded or purchased on physical media, such as a DVD. After the purchase of certain PC video games, users need to confirm their "activation key" on Steam to authenticate the game and be able to play it. This system is used for a wide range of games, including sports, simulation and action games.

The Commission's preliminary view is that Valve and the five PC video game publishers entered into bilateral agreements to prevent consumers from purchasing and using PC video games acquired elsewhere than in their country of residence (so-called “geo-blocking”). This is against EU antitrust rules.

In particular, the Commission is concerned that:

  • Valve and the five PC video game publishers agreed, in breach of EU antitrust rules, to use geo-blocked activation keys to prevent cross-border sales, including in response to unsolicited consumer requests (so-called “passive sales”) of PC video games from several Member States (i.e. Czechia, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia, and in some cases Romania). This may have prevented consumers from buying cheaper games available in other Member States.
  • Bandai Namco, Focus Home, Koch Media and ZeniMax, broke EU antitrust rules by including contractual export restrictions in their agreements with a number of distributors other than Valve. These distributors were prevented from selling the relevant PC video games outside the allocated territories, which could cover one or more Member States. These practices may have prevented consumers from purchasing and playing PC video games sold by these distributors either on physical media, such as DVDs or through downloads.

The Commission's preliminary view, outlined in its Statements of Objections, is that these business practices partitioned markets according to national borders and restricted passive sales to consumers. These business practices ultimately denied European consumers the benefits of the EU's Digital Single Market to shop around for the most attractive offer.

If confirmed, this would infringe Article 101 of the Treaty on the Functioning of the European Union, which prohibits anti-competitive agreements. The sending of a Statement of Objections does not prejudge the outcome of the investigation.

 

Background

The geo-blocking Regulation

The investigations into geo-blocking of PC video games complement Regulation 2018/302 on unjustified geo-blocking, which is applicable throughout the EU since 3 December 2018.

The Regulation prohibits geo-blocking and other geographically-based restrictions which undermine online shopping and cross-border sales by limiting the possibility for consumers and businesses to benefit from the advantages of online commerce. Currently, the Regulation applies to PC video games distributed on CDs, DVDs but not to downloads.

The Commission will carry out a first evaluation of the Regulation by 23 March 2020. In particular, the Commission will assess the scope of the Regulation, including its possible application to certain electronically supplied services which offer copyright-protected content such as music, e-books, software and online games, as well as of services in sectors such as transport and audio-visual.

Procedural background

The Commission opened formal antitrust proceedings into the bilateral agreements concluded between Valve Corporation and the five PC video game publishers on 2 February 2017.

This investigation is a stand-along procedure, independent of but following up on some of the issues identified in the Commission's competition sector inquiry on e-commerce.

A Statement of Objections is a formal step in Commission investigations into suspected violations of EU antitrust rules. The Commission informs the parties concerned in writing of the objections raised against them. The parties can then examine the documents in the Commission's investigation file, reply in writing and request an oral hearing to present their comments on the case before representatives of the Commission and national competition authorities.

If, after the parties have exercised their rights of defence, the Commission concludes that there is sufficient evidence of an infringement, it can adopt a decision prohibiting the conduct and imposing a fine of up to 10% of a company's annual worldwide turnover.

There is no legal deadline for the Commission to complete antitrust inquiries into anticompetitive conduct. The duration of an antitrust investigation depends on a number of factors, including the complexity of the case, the extent to which the undertaking concerned cooperates with the Commission and the exercise of the rights of defence.

More information on the investigation will be available under the case numbers AT.40413 (Focus Home), AT.40414 (Koch Media), AT.40420 (ZeniMax), AT.40422 (Bandai Namco), and AT.40424 (Capcom) in the public case register on the Commission's competition website.

 

EDIT

Valve has released a statement on the accusations from the EU: 

Quote

“However, the EC's charges do not relate to the sale of PC games on Steam - Valve's PC gaming service. Such keys allow a customer to activate and play a game on Steam when the user has purchased it from a third-party reseller. Valve provides Steam activation keys free of charge and does not receive any share of the purchase price when a game is sold by third-party resellers (such as a retailer or other online store).”

“The region locks only applied to a small number of game titles.  Approximately just 3% of all games using Steam (and none of Valve's own games) at the time were subject to the contested region locks in the EEA. Valve believes that the EC's extension of liability to a platform provider in these circumstances is not supported by applicable law. Nonetheless, because of the EC's concerns, Valve actually turned off region locks within the EEA starting in 2015, unless those region locks were necessary for local legal requirements (such as German content laws) or geographic limits on where the Steam partner is licensed to distribute a game.  The elimination of region locks will also mean that publishers will likely raise prices in less affluent regions to avoid price arbitrage. There are no costs involved in sending activation keys from one country to another and the activation key is all a user needs to activate and play a PC game.”

 


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Legal this and that is too complicated for me, so I basically ignore it. The steam thing though I've never liked. I know weird. Close to 10 years ago when I bought half-life2, I believe we were forced to activate though the service. Which sucked if an online connection wasn't available. Seemed like I remember not being able to play without logging on. Or something of that sort. This persuaded me to not buy games anymore (except for Crysis2 and AssassinsCreed:Brotherhood). I'm surprised actually that it took this long to start showing outward negative signs. Maybe it was and I wasn't paying attention.

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@GoliathForge In short - legally in EU all member states are single digital market - where you can't discriminate based on geolocation. Those companies infringed rights of citizens of named member states (therefore including my own, as I'm Czech), which is against Article 101 which guarantees single digital market for whole EU (implemented by member states in their law). The fine for that is up to 10% of total annual revenue of the company (which is huge even for large corporations).

Personally I'm glad that they are investigating into this - because rules should apply to everyone.

After all, I (as my company) have to offer my services with same terms for everyone in EU, so why shouldn't large corporations too?

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3 hours ago, Vilem Otte said:

legally in EU all member states are single digital market - where you can't discriminate based on geolocation

Maybe they can apply that rule to the collection of VAT too, please? :D :D 

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23 minutes ago, Hodgman said:

Maybe they can apply that rule to the collection of VAT too, please? :D :D 

There were attempts to generalize VAT already, sadly they have failed (as each member state likes to define their own (often multiple) VAT - some like Ireland have 5 different VAT rates if I remember correctly the chart).

On business level (i.e. when doing transactions of VAT payer to VAT payer entity) - resolving VAT with other VAT payers that are non-Czech but in EU is by far more simple, than resolving VAT with VAT payers that are Czech businesses (due to great inventions of our government - where I literally have to fill each VAT transaction within Czech Republic multiple times, each in different form, which is sent monthly (and some additional are even sent instantly upon transaction) to our beloved emperor... eh... government).

But once you start selling to end users that are non-VAT entities, you will go nuts (although you can use MOSS for some services).

 

Thinking about it - you do have to collect VAT in each country separately when you are foreign business right? Or can you register as MOSS?

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