Full Steam Ahead: Valve Corp. Sued for Antitrust Violations, Tying Video Games to Steam Store

Video game publisher Wolfire Games LLC and two consumers filed a class-action complaint on Tuesday in the Western District of Washington against Valve Corporation for alleged antitrust violations for not only Steam-enabled personal computer games, but also games sold on the Steam Store.

According to the complaint, “Personal Computer (‘PC’) games, a subset of video games, alone generate at least $30 billion worldwide annually. Of those sales, approximately 75% flow through the online storefront of a single company, Valve.” Valve’s online game store Steam “dominates the distribution of PC games.” The plaintiffs alleged that because of this dominance, Valve takes a 30% commission from every sale through its store, which allegedly generates more than $6 billion in annual revenue for Valve.

The plaintiffs averred that Valve is able to charge a 30% commission because “it actively suppresses competition to protect its market dominance.” The plaintiffs noted that other games stores have charged 10-15%, but they were unable to gain significant market share because Valve purportedly “abuses its market power to ensure game publishers have no choice but to sell most of their games through the Steam Store, where they are subject to Valve’s 30% toll.”

Specifically, the plaintiffs argued that Valve knows that typically a PC game must be compatible with the Steam Gaming Platform in order to be successful. The plaintiffs explained that Valve’s Steam Gaming Platform “provides a software environment where gamers can maintain their library of games, connect with others for social networking and multiplayer gaming, and access other ancillary services provided by Valve.” The plaintiffs noted that Valve is the largest platform for PC games in the world, thus “PC game publishers consider it essential for their games to be compatible with the Steam Gaming Platform. Otherwise, they cannot reach the vast majority of their potential customers.”

The plaintiffs alleged that Valve’s purported scheme ties the Steam Gaming Platform and the Steam Store, allowing Valve to dominate both. Consequently, because game publishers want to sell their games through Valve, Valve “requires the publisher to sell the vast majority of its games through Valve’s Steam Store”; therefore, Valve can allegedly keep prices high as well as gain and maintain its market dominance. Reportedly, because game publishers must pay Valve’s 30% commission, they “invest less in creating new games and must charge higher prices, therefore selling fewer games to consumers.”

Furthermore, in addition to the 30% commission and requirement to sell most of their games via the Steam Store, Valve also “imposes pricing restraints that inflate prices across the market in order to protect Valve’s monopoly position and power in the relevant markets.” Allegedly, these restraints prevent other game stores from gaining market shares through price competition with the Steam Store. Specifically, the plaintiffs claimed that Valve prevents competitive pricing through its Steam Key Price Parity Provision and the Price Veto Provision. According to the plaintiffs, this essentially stops competing stores from offering better prices on Steam-enabled games. Thus, the plaintiffs proffered, this lack of competitive pressure has allowed Valve to keep its high commission and prices. As a result, other game distributors that have tried to compete with Valve via lower commissions on Steam Keys, which grant access to Steam-enabled games, “failed to make a dent in the Steam Store’s market share because publishers using those distributors had to charge the same inflated prices they set on the Steam Store.”  Moreover, the Price Veto Provision gives Valve “veto power over their pricing in the Steam Store and across the market generally.” The plaintiffs contended that both game publishers and consumers have been harmed by Valve’s conduct.

The class consists of: “All persons and entities who, directly or through an agent, purchased or sold a PC game on the Steam Store in the United States from January 28, 2017 through the present (the ‘Class Period’). Excluded from the Class are Defendant and its employees, parents, and subsidiaries.” The plaintiffs noted that the buyers (gamers) and sellers (publishers) are direct purchasers of the Steam Store’s services.

The causes of action are violation of Section 1 and 2 of the Sherman Act and violation of the Washington State Consumer Protection Act.

The plaintiffs seek an injunction; an award for damages, costs, and fees; pre- and post-judgment interest; declaratory relief; and other relief.

The plaintiffs are represented by Quinn Emanuel Urquhart & Sullivan LLP and Constantine Cannon LLP.