On April 5, 2019, the Commission sent a Statement of Objections (“SO”) to Valve, the owner of the video game distribution platform Steam, as well as five video game publishers[1] whose video games are distributed by Valve. The SO sets out the Commission’s concerns that the companies have prevented customers from purchasing PC video games online from sellers in certain Member States in Central and Eastern Europe[2] where prices are lower (so-called “geo-blocking”).[3]

The five video game publishers distribute their games via Valve’s Steam platform, where customers can purchase and play video games. Valve provides the publishers with so-called “activation keys” that have (at least in some instances) been locked to the country in which the video game was purchased as well as—in some cases—additional countries. Customers receive an activation key upon purchase of a video game through channels other than Steam—whether digitally through downloads or a physical copy— which must be entered on Steam to start playing. The Commission has preliminarily concluded that Valve and the five video game publishers used the activation keys to partition the market. More specifically, (i) Valve is alleged to have restricted cross-border sales, including passive sales (i.e., where sellers respond to unsolicited customer requests) by using geo-blocked activation keys that prevented customers from buying video games at a lower price in other Member States (notably, Valve’s own prices varied by Member State); and (ii) the five video game publishers are alleged to have included contractual export restrictions in their agreements with distributors (other than Valve) that prevented them from selling the video games outside specifically allocated territories. The Commission reasoned that these restrictions may have prevented consumers from buying cheaper games available in other Member States (i.e., in certain Central and Eastern European Member States), thereby denying consumers the benefits of the EU’s Single Digital Market to shop around for the lowest price, in violation of Article 101 TFEU.

In a public statement, Valve explained that it had turned off geo-blocks (“region locks”) within in the EEA starting in 2015 in response to the Commission’s concerns, adding that they had in any event only been used for a small number of video games available on Steam (approx. 3%)—and on none of its own games. In Valve’s view, the elimination of geo-blocks will result in publishers increasing prices in “less affluent regions” to thwart price arbitrage.[4] Valve will undoubtedly seek to establish and quantify these alleged price- developments in its response to the SO.

The SO comes in the wake of the Single Digital Market strategy and new rules on e-commerce (such as the Geo-Blocking Regulation[5]), which have triggered a flurry of enforcement activity—including in particular the fines imposed on GUESS[6] and Nike[7]—as reported in our December 2018 and March 2019 newsletters. These rules are intended to afford EU consumers full access to goods and services offered anywhere in the EU, in particular online through cross- border deliveries. In this case, the Commission specifically included video game downloads within the scope of the SO, even though the Geo-Blocking Regulation does not apply to video game downloads, noting that its investigation complements the Geo-Blocking Regulation.

[1]      Bandai Namco, Capcom, Focus Home, Koch Media, and ZeniMax.

[2]      Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia, and in some cases Romania.

[3]      Commission Press Release IP/19/2010, “Antitrust: Commission sends Statements of Objections to Valve and five videogame publishers on “geo-blocking” of PC video games,” April 5, 2019.

[4]      See https://steamdb.info/blog/steam-geo-locking-europe/.

[5]      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 and amending Regulations (EC) No. 2006/2004 and (EU) 2017/2394 and Directive 2009/22/EC, OJ 2018 LI 60/1.

[6]      GUESS (Case COMP/AT.40428), Commission decision of December 17, 2018. See also EU Competition Law Newsletter, December 2018, pp. 1–2.

[7]      Ancillary sports merchandise (Case COMP/AT.40436), decision not yet published. See also EU Competition Law Newsletter, March 2019, pp. 6–8.