Gaming giant Valve has been hit with a €1.6 million ($2 million) fine after European Union regulators ruled it helped restrict cross-border sales on Steam, the world’s largest online platform for PC games.
The EU’s antitrust regulators fined Valve and five game publishers a total of €7.8 million ($9.5 million) on Wednesday for engaging in what they said were illegal “geo-blocking” practices.
Valve, which is privately owned, chose not to cooperate in the EU’s investigation and did not expressly acknowledge that it broke EU rules, prompting a higher fine than it would have otherwise received, the bloc said.
The publishers fined by the European Commission, the executive arm of the bloc, include publicly-traded Bandai Namco
and Focus Home
which all fell on Wednesday, as well as privately-held Koch Media and ZeniMax. All of the publishers cooperated with the EU and were granted a 10% to 15% reduction in fines.
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Steam is one of the world’s largest online computer gaming platforms, offering users access to more than 35,000 games. Valve facilitates the playing of games on Steam by issuing “activation keys” to publishers, which are then passed on to gamers in their purchase.
Valve also offers publishers the ability to control where their games are activated onto the Steam platform from, the bloc said, which, combined with the activation keys, allows the “geo-blocking” of games depending on the location of the user.
The European Commission said that Valve made bilateral agreements with the publishers to issue activation keys that prevented games from being played on Steam outside of certain EU member states.
This stopped gamers outside of the Czech Republic, Poland, Hungary, Romania, Slovakia, Estonia, Latvia, and Lithuania from playing around 100 games on Steam between 2010 and 2015.
Limiting access for consumers within the EU—partitioning the single market—is in breach of the bloc’s competition rules.
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“More than 50% of all Europeans play video games. The videogame industry in Europe is thriving and it is now worth over €17 billion,” said European Commissioner Margrethe Vestager, who is the head of both competition and digital policy for the bloc.
“Today’s sanctions against the ‘geo-blocking’ practices of Valve and five PC video game publishers serve as a reminder that under EU competition law, companies are prohibited from contractually restricting cross-border sales,” Vestager said.
She added: “Such practices deprive European consumers of the benefits of the EU Digital Single Market and of the opportunity to shop around for the most suitable offer in the EU.”
Valve pushed back against the regulators’ decision, noting that the alleged geo-locks do not apply to games sold on Steam, but rather through third-parties. Valve does not receive any share of the purchase price when a game is sold by third-parties, the company said.
“During the seven year investigation, Valve cooperated extensively with the European Commission (“EC”), providing evidence and information as requested,” spokesperson Doug Lombardi told MarketWatch. “However, Valve declined to admit that it broke the law, as the EC demanded. Valve disagrees with the EC findings and the fine levied against Valve,” he said.
Lombardi added that “Valve believes that the EC’s extension of liability to a platform provider in these circumstances is not supported by applicable law.”
Moreover, Lombardi said that the elimination of these geographic locks may actually cause publishers to raise prices in poorer regions to avoid “price arbitrage.”
“There are no costs involved in sending activation keys from one country to another, and the activation key is all a user needs to activate and play a PC game,” Lombardi said.
Separately, the EU regulators found that four of the publishers—Bandai, Focus Home, Koch Media and ZeniMax—signed licensing and distribution agreements that restricted cross-border game sales between 2007 and 2018.
Valve is best known for running Steam, but has also developed popular video game titles including Portal, Team Fortress, Left 4 Dead, Half-Life, Counter-Strike, and Dota.
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The antitrust investigation into the agreements between Valve and the five publishers began in 2017.
Vestager is also one of the key figures behind the EU’s move to regulate large American tech companies like Facebook
The decision against Valve marks an expansion of her tough regulatory regime from online platforms to video games.
MarketWatch has reached out to the five publishers. Koch Media acknowledged the case in a statement from its parent company.