Video games sector hit with anti-trust fine for geo-blocking practices

By Pauline Van Sande

02-2021

One of the final cases resulting from the European Commission's e-commerce sector enquiry has come to a conclusion. On 20 January 2021, the Directorate-General for Competition fined Valve Corporation, owner of the Steam game distribution platform, and five personal computer (PC) video game publishers, namely Bandai Namco, Capcom, Focus Home, Koch Media and ZeniMax €7.8 million for breaching EU antitrust rules through bilateral agreements.

Valve digitally distributes PC video games from each of the five game publishers via its online PC gaming platform “Steam”. In order to do so, Valve provides these publishers with "activation keys", free of charge. These activation keys are required for consumers to play certain PC video games bought on channels other than Steam, i.e. downloaded or purchased on physical media. After the purchase of such PC video games, users need to confirm their activation key on Steam to be able to play it.

The Commission found that Valve and the five PC video game publishers entered into bilateral agreements to prevent consumers from purchasing and using PC video games acquired in countries other than their country of residence (so-called “geo-blocking”). More precisely, the agreements prevented the activation of certain of the publishers' PC video games outside Czechia, Poland, Hungary, Romania, Slovakia, Estonia, Latvia and Lithuania. The Commission also discovered geo-blocking practices in the licensing and distribution agreements concluded between the video game publishers, except for Capcom, and certain of their video games distributors in the EEA, other than Valve. These agreements contained export restrictions which restricted passive sales of video games outside of the distributor allocated territories.

At the outset, the Commission assessed whether it would be more efficient to open a case under the rules of abuse of dominant position, but eventually decided to investigate the behaviour under the rules regarding restrictive agreements. Another notable feature is the hybrid character of the case, since the video game publishers cooperated with the Commission, while Valve chose to contest the allegations. Amongst other arguments, Valve asserted that it is a software service provider which acts as an agent of the publishers, while the Commission classified it as an independent online distributor of games. Valve also claimed that EU copyright rules allow the online licensing of games on a country-by-country basis. The Commission, however, has consistently stated that competition law still applies to restrictions that go further than normal copyright protection, as confirmed by the recent win by Canal+ in front of the European Court of Justice.

Additionally, the European Commission recently published a short-term review of the Geo-Blocking Regulation, in which it analyses a possible extension of the scope to copyright protected content services such as video games, which are currently largely excluded. The Commission decided not to extend the scope for the time being, but to assess the possibility of an extension again in 2022.

For more information please contact Pauline Van Sande

 
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