In 2021, the European Commission determined that Valve and five publishers (namely Bandai, Capcom, Focus Home, Koch Media, and ZeniMax) were in breach of EU competition regulations. This was due to their practice of selling game copies at varying prices across different European nations from 2010 to 2015. The game keys were geo-blocked, meaning that if they were purchased in the store of a given European country, they could not be activated in another European country.
Particularly, the Commission decided that Valve, together with the five publishers, had breached Article 101 TFEU and Article 53 of the EEA Agreement through anti-competitive agreements or concerted practices aimed at restricting cross-border sales of Steam videogames in the form of passive sales. According to the Commission, the conduct at issue would constitute a restriction of competition by object, meaning that, by its very nature, it is a practice that inherently undermines the proper functioning of regular competition.
For these reasons, the European Commission had therefore imposed a total fine of approximately 7.8 million euros. The five publishers collaborated, receiving a discount. Valve decided to contest the decision, so the fine remained at 1.6 million euros.
Before the General Court of the European Union, Valve submitted that this case would call for the first time for a consideration of the use of TPMs (i.e., technological protection measures) within the meaning of Article 6 of the InfoSoc Directive. According to the applicant, the Commission should have viewed Valve as a provider of digital services, not merely a reseller or distributor of the publishers’ games. Consequently, a case like this would not call for the application of existing case law on parallel imports for the purpose of categorizing the agreements in question as a restriction by object.
The Court found that the Commission has sufficiently demonstrated the existence of an agreement or concerted practice between Valve and each of the five publishers aimed at restricting parallel imports through geo-blocking of keys that allow the activation and, in some cases, the utilization of the video games at issue on the Steam platform. This geo-blocking practice was intended to prevent the video games, distributed at lower prices in certain countries, from being purchased by distributors or users located in other countries where prices are significantly higher.
In response to an argument put forward by Valve, the GC stated that the geo-blocking at issue did not pursue an objective of protecting the copyright of the publishers of the PC video games but was used to eliminate parallel imports of those video games and protect the high royalty amounts collected by the publishers, or the margins earned by Valve.
The General Court finally ruled on the relationship between EU competition law and copyright. Referring to the Premier League CJEU decision, the GC recalled that “copyright is intended only to ensure for the right holders concerned protection of the right to exploit commercially the marketing or the making available of the protected subject matter, by the grant of licenses in return for payment of remuneration; it does not guarantee the right holders concerned the opportunity to demand the highest possible remuneration or to engage in conduct such as to lead to artificial price differences between the partitioned national markets”.
The ruling at issue contributes to shed light on the interplay between IP protection and competition rules and confirm the case law according to which geo-blocking practices in the e-commerce sector should be addressed as violation of the EU competition regulations. Finally, in the Web 3.0 era, interoperability within markets constitutes a crucial element, thus this type of decision represents a further step forward in the context of the elimination of all those barriers that hinder the correct functioning of interoperability.
Header image created with Microsoft Bing. Prompt: “the geo-blocking at issue did not pursue an objective of protecting the copyright of the publishers of the PC video games but was used to eliminate parallel imports”.
