Valve + 5 game publishers and violation of geoblocking/antitrust law

Commissioner Margrethe Vestager, responsible for competition policy, explained:

“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. They should not be prevented from buying in the Member State where they find the most favourable offer. Valve and the five video game publishers now have the opportunity to respond to our concerns.

Valve distributes PC video games electronically through Steam PC video games of all publishers affected by the investigation. At the same time, Valve provides “product keys” to the aforementioned publishers.

These “product keys” require consumers to use a range of games purchased through channels other than Steam, i.e. downloaded or delivered on physical media such as DVDs. After purchasing certain PC video games, users must confirm their “product key” on Steam to authenticate and use the game. This system is used for a wide range of games, including sports, simulation and action games.

According to the Commission’s preliminary view, Valve and the five PC video game publishers have entered into bilateral agreements to prevent consumers from using PC video games not purchased in their country of residence (so-called geoblocking). This is in breach of EU antitrust rules.

In particular, the Commission is concerned about:

• Valve and the five PC video game publishers agreed, in breach of EU competition rules, to prevent cross-border sales by using product keys with geographical blocks, including in response to unsolicited orders (so-called passive purchases) of PC video games from various Member States (namely the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia and, in some cases, Romania). This may have prevented consumers from buying games in other Member States at lower prices.
• Bandai Namco, Focus Home, Koch Media and ZeniMax violated EU competition rules by including contractual provisions restricting exports in their agreements with a number of distributors other than Valve. Distributors were not allowed to sell the PC video games in question outside the allocated territories, which could include one or more Member States. These practices may have prevented consumers from buying and playing video games offered by these distributors either on physical media such as DVDs or as downloads.

According to the Commission’s preliminary view set out in the statement of objections, these companies have closed off their national markets and restricted passive purchases by consumers. These business practices ultimately denied European consumers a preference for the EU’s Digital Single Market, namely the ability to choose the most attractive offer across borders.

If confirmed, this would be in breach of Article 101 of the Treaty on the Functioning of the European Union, which prohibits anti-competitive agreements. The transmission of the statement of objections does not prejudge the outcome of the investigation.

Background

The Geoblocking Regulation

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

The regulation prohibits geo-blocking and other geographical restrictions that make online shopping and cross-border sales more difficult by curtailing the opportunities for consumers and businesses to take advantage of online commerce. The regulation currently applies to PC video games distributed on CDs or DVDs, but not to downloads.

The Commission will carry out an initial assessment of the Regulation by 23 March 2020. In particular, it will consider the scope of the Regulation and its possible application to certain electronically supplied services offering copyrighted content such as music, e-books, software and online games, as well as to services in areas such as transport and audiovisual services.

Background information on the procedure

On February 2, 2017, the Commission opened formal antitrust proceedings concerning the bilateral agreements between Valve Corporation and the five publishers of PC video games.

This is a separate procedure that is independent of the competition law sector inquiry into e-commerce, but represents a follow-up to some of the problems identified therein.

A Statement of Objections is a formal step in the Commission’s investigation into alleged breaches of EU antitrust rules. The Commission shall inform the parties in writing of the complaints lodged against them. The parties may then consult the Commission’s investigation file, submit their comments in writing and request an oral hearing in order to present their views to representatives of the Commission and the 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 may adopt a decision prohibiting the conduct and fines of up to 10 of their annual worldwide turnover.

The Commission is not subject to a legally binding period for the conclusion of antitrust investigations into anti-competitive practices. The duration of an antitrust investigation depends on a number of factors, such as the complexity of the case, the extent to which the undertaking concerned cooperates with the Commission and the exercise of the rights of the defence.

Further information on this cartel case will soon be available in the public register on the Commission’s competition law website under the numbers AT.40413 (Focus Home), AT.40414 (Koch Media), AT.40420 (ZeniMax), AT.40422 (Bandai Namco) and AT.40424 (Capcom).