PC-gaming giant to face collective proceedings in the UK | Rob Harkavy

Children’s rights campaigner Vicki Shotbolt has filed a more-than GBP 650 million claim in the Competition Appeal Tribunal.

The world’s largest distributor of PC games, the Valve Corporation-owned Steam, is facing the spectre of a multimillion-pound collective action in the UK after proposed class representative Vicki Shotbolt, a prominent campaigner for children’s digital rights and the founder of the advocacy group Parent Zone, last week filed a claim in the Competition Appeal Tribunal. The opt-out claim, filed on behalf of 14 million UK-based PC gamers for a total of GBP 656 million, alleges breaches of UK competition law and abuse of dominance, in violation of section 47B of the Competition Act 1998. According to estimates from Berkeley Research Group, if the claim is certified and subsequently successful, gamers who fall within the class can expect to recoup around GBP 44 per person.

PRICE PARITY

The crux of the complaint lies in the so-called ‘price parity’ condition imposed on game developers who wish to distribute their games on Steam. As Shotbolt’s legal representative, Natasha Pearman of Milberg London, which is also acting in Alex Neill’s claim against Sony Playstation in another gaming-related lawsuit, explains: “[Price parity] is an obligation on all developers that, if they sell their games or in-game content on a rival distribution channel, they cannot sell it for less than they sell it on Steam.”

Because of the price parity condition, and given its market dominance, Steam is able to – and does – charge a 30% commission on all sales made via its platform. This, according to a press statement from the claimant, “prevents the same games being sold at a cheaper price on rival platforms” and “has enabled the gaming giant to continue charging an excessive commission – of up to 30% – to publishers and has led to UK consumers paying too much for purchasing PC games and add-on content.”

Price parity inevitably leads to price harmonisation, whereby, according to Pearman, “it doesn’t become effective for developers to sell on other channels because, normally, an alternative channel would try to attract users through price competition.” Pearman continues, “Steam has essentially taken away normal competition by introducing this price parity provision, so there’s no ability for real competition to thrive or emerge on alternative distribution channels.”

MARKET DOMINANCE

Steam’s market dominance is self-evident; the platform offers its 62.6 million daily users a choice of around 74,000 games, with the next biggest players – Epic and Microsoft Store – with approximately 3,000 games each.

As well as Steam’s price parity condition ensuring that the company is never undercut by rivals, the claimants are also alleging that the 30% commission charged to developers is unduly high – and it certainly compares unfavourably with the 12% levied by the Microsoft Store. Similarly, Epic founder and CEO Tim Sweeney is on record as saying that 13% is a fair commission level.

In an email to CDR, Shotbolt explains: “Valve must be held to account for breaking the law. Abusing its dominant position to force publishers to sign up to illegal trading terms and tying consumers in and charging excessive prices has to stop.”

“Gaming is too important in all our lives, particularly children’s, for this behaviour to go unchecked. I want all PC gamers to be compensated for the money they’re owed.” It is estimated that 93% of 10–16 year olds in the UK regularly play video games, each spending an average of GBP 38 per month.

WIDER IMPLICATIONS

There are implications for the UK economy if it is found that home-grown game developers are hogtied by unfair practices by the world’s largest distributor. The sector represents something of a success story for the UK, with its video gaming industry the largest in Europe, employing highly skilled graduates and exporting its products all over the world. Games developed in the UK include the hugely successful Grand Theft Auto franchise, Batman and Lego. Were the sector to be freed from operating under conditions that a court deems unfair, resulting in the win-win scenario of lower prices for consumers and developers able to retain more of their profits, this can only be positive news for UK plc.

Offering a pithy summary of the claim, Milberg London’s Pearman said in a statement: “UK gamers spend billions every year and Valve has a stranglehold on the PC gaming market. Competition law is there to protect consumers and ensure that markets work properly. When they don’t work properly and consumers are harmed, collective actions of this kind provide consumers with a voice and a way of holding big companies, like Valve, to account. We’re delighted to be working with Vicki to seek compensation for UK consumers.”

Vicki Shotbolt and the proposed class are represented by Robert Palmer KC, Julian Gregory and Will Perry of Monckton Chambers, instructed by Milberg London. Valve Corporation’s legal representative, RPC, did not immediately respond to a request for comment.

The claim is being funded by Bench Walk Advisors.