New opt-out collective proceedings claim on behalf of PC gamers

Last week Milberg and a Monckton counsel team of which I am part helped to file a collective proceedings claim against Valve, the owner of Steam, the leading PC games platform.? The claim seeks aggregate damages of up to ￡656m on behalf of anyone who has purchased PC games, or add-on content for such games (such as extra storylines, characters etc), over the claim period. ?

The PCR is a corporate entity, the sole director of which is Vicki Shotbolt, who is familiar with the sector through her role as the CEO of Parent Zone, which specialises in understanding the impact of digital technologies, including in particular games, on families and children (Ms Shotbolt is also on the PCR’s advisory panel in the Neil v Sony case). The funder is Benchwalk and the expert economists Berkeley Research Group.

The claim contends that Valve has abused a dominant position by:

1.????? Imposing Platform Parity Obligations (PPOs), a form of MFN clause, which prevent publishers from selling any games distributed by Steam on better terms through other distribution channels (whether on rival distribution platforms or through their own websites etc).

2.????? Preventing publishers from selling add-on content for base games initially distributed on Steam through any other channel – which includes a prohibition on publishers including in-game links that would allow users to purchase such content direct from the publisher.

a.?????? The context is that gamers now spend more money buying add-on content than in purchasing initial base games, many of which are distributed without charge under a ‘freemium’ model.

b.????? These restrictions are characterised as unlawful ties and/or anti-steering restrictions (of the sort that provided the basis for the European Commission’s recent infringement in the Apple music streaming case).

3.????? Imposing unfair and excessive commission charges on publishers for distributing their products on Steam, including a primary commission charge of 30%.? Tim Sweeney, CEO of Epic Games, which operates a rival PC game store, has stated that the costs of operating a game distribution platform are in the region of 5 to 7%.? Similar allegations relating to Apple’s App Store and Google’s Play Store commission charges are currently under consideration by the Tribunal in the Kent and Coll cases.

The PCR contends that the three abuses are connected because Valve’s PPOs and tying/anti-steering restrictions are designed to reduce the competitive pressure to which Steam’s high commission charges are subject.

Those commission charges are hugely profitable for Valve: in 2011 its CEO asserted that it was more profitable per employee than Apple or Google.? Despite Valve’s profitability, the relevant markets have not experienced the sort of sustained, successful competitor entry or expansion that might have been expected, and which would have competed down Valve’s high commission rates, in large part because of the restrictions imposed by Valve under the first two abuses.? On the contrary, various companies have entered with rival distribution platforms that have quickly failed, and large publishers have withdrawn their products from Steam - which has access to a much larger group of users than any other distribution channel - only subsequently to return.

Some of the same abusive conduct – in particular Valve’s PPOs – is the subject of litigation in the US, and an investigation that has recently been launched by the Polish competition authority.

The claim website can be found here.

Julian