A proposed class action alleges Valve Corporation has been able to channel roughly 75 percent of all sales in the reportedly $30 billion PC gaming industry through its online Steam store by suppressing competition and keeping would-be competitors out of the market.
The 78-page antitrust lawsuit alleges Valve has come to “dominate” the distribution of PC games by flexing its market muscle to effectively channel the majority of PC game sales through its Steam store, where the company takes a 30-percent cut on each sale. Central to the lawsuit is Valve’s apparent control of both the Steam store, where PC games are sold, and the Steam gaming platform, where games are played.
Whereas “[m]any” other PC game stores have tried to charge lower fees, in the range of 10 to 15 percent, for PC game sales, they have all failed to achieve a significant market share because Valve, according to the case, “abuses its market power” to ensure competitors have no choice but to sell most of their games through Stream, where they run up against Valve’s 30-percent “toll.”
The proposed class action summarizes that the “extraordinarily high” cut Valve takes from every Steam sale has yielded the company more than $6 billion in annual revenue, but “[f]or everyone else, it yields higher prices and less innovation.” Per the case, Valve is aware that PC games, with rare exceptions, must be compatible with its Steam Gaming Platform, a software environment where players can maintain their library of games, connect with others and access other ancillary Valve services.
According to the lawsuit, it’s the “must-have” nature of the Steam platform that Valve has used to “exploit publishers and consumers.” From the complaint:
“The scheme is straightforward. If a game publisher wants to sell games that are enabled for the Steam Gaming Platform, Valve requires the publisher to sell the vast majority of its games through Valve’s Steam Store. And when the game publisher sells through the Steam Store, Valve takes its 30% cut of nearly every sale. Through this scheme, Valve leverages the dominance it has in the PC Desktop Gaming Platform Market from its control of the Steam Gaming Platform (where games are played) to keep prices high, and to gain and maintain dominance in the separate market for PC Desktop Game Distribution (where games are bought and sold).”
The case alleges Valve’s “scheme” has been “wildly successful,” citing a former employee for the defendant who described the Steam store as a “virtual printing press” in light of its “30% tax on an entire industry.” The lawsuit says that although innovation is the engine of the video game industry, Valve’s 30-percent tax “suppresses innovation and output” industry-wide and increases the prices of PC desktop games.
As a result, game publishers, who effectively have no choice but to pay Valve’s tax, “invest less in creating new games and must charge higher prices,” which leads to fewer games being sold to consumers, according to the complaint.
“The only one benefitting is Valve, which makes astronomical profits,” the suit claims.
The lawsuit goes on to allege Valve imposes “pricing restraints” that inflate prices across the market as a means for the company to protect its alleged monopoly position. With these “restraints,” the case says, Valve prevents other game stores from gaining share by competing with the Steam store on price. Valve accomplishes this, according to the lawsuit, by imposing two contractual provisions, called the Steam Key Price Parity Provision and the Price Veto Provision, that give the company significant power to dictate to which parties “Steam Keys,” which publishers use to make some third-party sales of Steam-enabled games, can be sold and the prices at which publishers sell their games in the Steam store and across the market generally.
“Ultimately, the only way for game publishers to avoid Valve’s anticompetitive scheme is to avoid the Steam Gaming Platform altogether, and not sign any agreements or contracts with Valve,” the suit alleges. “But time and time again, when publishers or other market participants have tried to create or utilize alternative PC Desktop Gaming Platforms, they have failed to obtain sufficient scale to challenge Valve because of Valve’s dominance and anticompetitive restraints.”
Among the entities who have run up against Valve on the competition front and fallen short are Electronic Arts, Microsoft, Amazon and Epic Games, the complaint relays, alleging that the “failure of these deep-pocketed companies is instructive” insofar as Valve’s alleged monopoly power is “durable and virtually impossible to overcome.”
The lawsuit aims to represent 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 complaint can be found below.
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