EU Slams Valve, Capcom and More Over 'Geo-Blocking' (Update)

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Update 4/5/19, 9:20 a.m. PT: Valve sent us a statement in response to the European Commission's announcement. The company reiterated that the commission's issues don't involve sales through Steam, just Steam activation keys used by physical copies of games and said it neither receives compensation directly from the companies nor a portion of sales for providing this service.

More important is the company's claim that few titles were affected by geo-blocking, that it shouldn't be subject to any penalties for providing a platform on which other companies did wrong and that the commission's complaint arrived a few years late: 

"The region locks only applied to a small number of game titles. Approximately just 3% of all games using Steam (and none of Valve's own games) at the time were subject to the contested region locks in the EEA [short for European Economic Area]. Valve believes that the EC's extension of liability to a platform provider in these circumstances is not supported by applicable law. Nonetheless, because of the EC's concerns, Valve actually turned off region locks within the EEA starting in 2015, unless those region locks were necessary for local legal requirements (such as German content laws) or geographic limits on where the Steam partner is licensed to distribute a game. The elimination of region locks will also mean that publishers will likely raise prices in less affluent 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."

Original article, 4/5/19, 7:38 a.m. PT:

The European Commission announced today that it sent Statements of Objections to Valve, Bandai Namco, Capcom, Focus Home, Koch Media and ZeniMax for "geo-blocking" Steam activation keys for physical copies of games (which do, in fact, still exist) based on national borders.

"In a true Digital Single Market, European consumers should have the right to buy and play video games of their choice regardless of where they live in the EU," Commissioner Margrethe Vestager said in a statement. "Consumers should not be prevented from shopping around between Member States to find the best available deal. Valve and the five PC video game publishers now have the chance to respond to our concerns."

The problem is that game publishers often base their prices on exchange rates, applicable taxes and limited promotions. Having a Digital Single Market could allow someone in Latvia, for example, to pay less than a publisher would like because they bought the Steam activation key from Valve's marketplace in Poland (like, the digital marketplace, not a booth at the local farmers' market or something). And they can't have that!

The European Commission said Valve and the game publishers agreed to block cross-border sales involving "Czechia, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia and in some cases Romania." All of the publishers except Capcom also included export restrictions in their contracts with other game distributors that "may have prevented consumers from purchasing and playing PC video games sold by these distributors."

These restrictions are said to violate Article 101 of the Treaty on the Functioning of the European Union via Regulation 2018/302, which prohibits geo-blocking, which is why the commission sent these Statements of Objections. That regulation went into effect in December 2018, but the commission's investigation into Valve and these game publishers actually started in February 2017. Now the companies have a chance to respond.

A lot depends on those responses: the commission said it can "adopt a decision prohibiting the conduct and imposing a fine of up to 10% of a company's annual worldwide turnover" if it "concludes that there is sufficient evidence of an infringement." Valve, Bandai Namco, Capcom, Focus Home, Koch Media and ZeniMax aren't small companies; the max penalty of 10 percent of their annual worldwide turnover isn't chump change.