According to the European Commission, the video game industry in Europe is worth €17 billion. With a market so significant, it is important that it works effectively for both consumers and business.
Following an investigation into geo-blocking, the European Commission has now fined Valve, owner of the online PC gaming platform “Steam” (which allows people to download or stream video games), and the five publishers Bandai Namco, Capcom, Focus Home, Koch Media and ZeniMax €7.8 million for breaching EU antitrust rules.
Readers will be aware that as well as EU competition laws, there are specific EU geo-blocking rules (which now apply differently to the UK post-Brexit) but this action was taken under competition laws only.
The European Commission opened an investigation in 2017, partly following up on issues found during its e-commerce sector inquiry, and found that Valve and the publishers restricted cross-border sales of certain PC video games according to users’ geographical location of users within the EEA, the so called “geo-blocking” practices. The fines for the publishers, totalling over €6 million, were reduced due to their cooperation with the Commission. Valve chose not to cooperate with the Commission and was fined over €1.6 million.
The video game publishers granted Valve a non-exclusive licence to exploit specified PC video games on a worldwide basis, including the entirety of the EEA. In turn, the publishers obtained from Valve a licence for the use of Steam activation keys for distribution of those PC video games outside Steam. The publishers requested Valve to set up geographical restrictions and to provide geo-blocked Steam activation keys. The publishers provided those keys to their distributors for sale and distribution of the PC video games in the member states concerned. As a result, users located outside a designated member state were prevented from activating a given PC video game with Steam activation keys.
The Commission found that by bilaterally agreeing to geo-block certain PC video games from outside a specific territory, Valve and each publisher partitioned the EEA market in violation of EU antitrust rules. In particular, Valve and the publishers engaged in the following geo-blocking practices:
- Bilateral agreements and/or concerted practices between Valve and each of the five PC video game publishers implemented by means of geo-blocked Steam activation keys which prevented passive sales. These lasted between one and five years and were implemented between September 2010 and October 2015.
- Geo-blocking practices in the form of licensing and distribution agreements concluded bilaterally between four out of the five PC video game publishers and some of their respective PC video games distributors in the EEA (other than Valve), containing clauses which restricted cross-border (passive) sales of the affected PC video games within the EEA. These lasted between three and 11 years and were implemented, depending on each bilateral relationship, between March 2007 and November 2018.
- The geo-blocking practices concerned around 100 PC video games of different genres, including sports, simulation and action games. They prevented consumers from activating and playing PC video games sold by the publishers' distributors either on physical media or through downloads. The Commission said that these business practices denied European consumers the benefits of the EU's Digital Single Market to shop around between member states to find the most suitable offer.
The fines are significant and illustrate the dangers of preventing passive sales as well as geo-blocking. It is worth noting that this may not be the end of the matter, as there are two other investigations in progress considering if certain online sales practices prevent consumers from enjoying cross-border choice and affect their ability to buy goods at competitive prices.
The European Commission’s head of competition policy, Margrethe Vestager, said:
Today’s sanctions against the ‘geo-blocking’ practices of Valve and five PC video game publishers serve as a reminder that under EU competition law, companies are prohibited from contractually restricting cross-border sales