Gaming the system

If you have ever used Steam, the online video game software distribution platform, and played online player games such as Counterstrike or Left 4 Dead, chances are you have been a consumer of Valve Corporation’s products. A recent dismissal of a special leave application by Valve Corporation to the High Court of Australia serves as a reminder for domestic and overseas-based companies selling to Australian consumers of the importance of the Australian Consumer Law (ACL) in our increasingly digitalised marketplace.

During the case of Valve Corporation v ACCC [2017] FCAFC 224, the Federal Court of Australia found that Valve had breached the ACL, handing down a A$3 million fine and required Valve to inform Australian consumers of their rights when purchasing games on the Steam platform. In determining that Valve had "engaged in misleading or deceptive conduct and made false or misleading representations about consumer guarantees", the Court held that:

1.   Despite the law of Washington State being the proper law governing the relevant supply contract, provisions within the ACL would still apply.

2.   Not all components that were supplied by Valve were goods, but the core of its supply was the provision of games on the Steam Platform, which was the supply of computer software and a “good” under the ACL.

3.   Despite its lack of physical retail stores in Australia, Valve was liable within the Australian jurisdiction as it sold products directly to Australian consumers.

4.   Valve had a no-refund policy claiming that consumers were not entitled to a refund for digitally downloaded games purchased from Valve via the Steam website.

5.   Valve had excluded and/or restricted or modified statutory guarantees and/or warranties, which warranted that the goods it provided would be of acceptable quality.

Computer Software

Under the ACL “computer software” is a type of good to which the ACL applies. However the ACL does not provide a definition of “computer software”. There exists an unanswered question as to which digital products satisfy the definition of “computer software” and which are excluded from the ACL. In the Federal Court, Justice Edelman attempted to provide a definition in Valve, that computer software was “executable data” and he noted the following at [138]-[139], "computer software is instructions or programs that make hardware work. The video games provided by Steam required computer software to make them work. The material downloaded by consumers included non-executable data such as music and html images. Mr Dunkle’s uncontested evidence on this point was that this non-executable data was not computer software. But he accepted that the computer software made that non-executable data work. In other words, one of the most fundamental things that Valve provided to its customers, more than 4,000 games, contained an essential component of “computer software”. The Steam Client used to access those games involves software. As Mr Dunkle said, the games consist of software and a number of other assets (eg music, images). Mr Dunkle also explained (ts 108) that the content in Steam’s vital “content servers” is the software for the game."

Following the determination of the High Court special leave application, the law in Australia is now clear that overseas companies supplying to Australian consumers can be caught by the teeth of the ACL. At Arnotts Technology Lawyers, we act for numerous overseas software companies selling into the Australian market, either directly or via their Australian subsidiaries. If you are an overseas software company supplying to Australian consumers and need help understanding your legal obligations, please contact us.

Authored by Alan Arnott (Technology Lawyer) and Shi Ying Yong (Paralegal)