crossborder sales

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On January 20, 2021, the European Commission (the “Commission”) fined Valve, owner of the video game platform Steam, together with five video game developers, Bandai Namco, Capcom, Focus Home, Koch Media and ZeniMax, 7.8 million euros. The sanctioned conduct consisted ofrestricting crossborder sales of video games based on the geographic location of users within the European Economic Area (“EEA”).

Functioning of the market: activation codes for video games

Steam is one of the world’s largest computer-based video game platforms. In addition to the video games available on Steam, users who buy games outside the platform can also activate and play these video games on Steam. For this purpose, Valve Corporation, owner of the platform, provides game developers with a “Steam activation code”. As a result, users who have bought a game from a third party can then use these codes to access Steam and use the platform.

Valve offers developers the possibility of applying a territorial control function to these activation codes to establish geographic restrictions upon activation. Thus, users who have bought a game in a Member State are then unable to activate it on Steam outside that territory.

The anticompetitive practices

In its Decision, the Commission found that the companies under investigation engaged in an anticompetitive practice consisting of bilateral agreements between Valve and each of the five game developers for the application of geographically restricted Steam codes in order to prevent the activation of video games outside the territory of certain Member States.

According to the Commission, the territorial restriction of activation codes geographically fragments the EEA in breach of EU competition rules. Such practice reduces crossborder competition within the single market since it restricts internal trade by preventing consumers from purchasing products at a lower price in other Member States.

At the same time, four of the five developers entered into licensing and distribution agreements with their respective video game distributors (other than Valve) which contained clauses restricting crossborder passive sales of these video games.

Procedural issues

This investigation is the latest of those opened by the Commission following the sector inquiryon digital commerce and continues the trend of the Commission in recent years of sanctioning vertical restrictions on e-commerce (Guess, Sanrio and Universal Studios cases).

Moreover, 2018 saw the approval of Regulation (EU) 2018/302, of the European Parliament and of the Council of February 28, 2018 on addressing unjustified geo-blocking and other forms of discrimination based on customers’ nationality, place of residence or place of establishment within the internal market, which complements Regulation 330/2010 on block exemption of vertical agreements. However, Valve’s file has not been examined in the light of Regulation 2018/302, given that the conduct took place before its entry into force.

The fines imposed on the publishers were reduced by 10% to 15% in view of the cooperation of the companies with the Commission. In contrast, according to the Commission, Valve decided not to cooperate, so its fine has not been reduced. Prior to the Judgment of the Court of Justice in case C-39/18P, ICAP, of July 10, 2019, in hybrid proceedings, where only some of the companies cooperate with the Commission, there was a more rapid termination of infringement proceedings for those companies that had opted to cooperate. However, in the ICAP case, the Court of Justice considered that simultaneous termination of the proceedings, rather than early termination of the proceedings only for cooperating parties, was more protective of the rights of defence of the parties. For that reason, the Commission has resolved simultaneously the various proceedings relating to this conduct.

More information can be accessed with case numbers AT.40413; AT.40414; AT.40420; AT.40422; AT.40424 on the competition website of the Commission.

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