Geo-blocking is illegal on all counts and the European Commission, as the EU’s competition watchdog, will waste no time in enforcing EU anti-trust rules against any trader which seeks to impede cross-border trade.
This has been made amply clear by the recent Commission’s Statement of Objections addressed to Valve, owner of the Steam video game distribution platform, and five videogame publishers, alleging a breach by these entities of EU competition rules.
The EU’s unjustified geo-blocking regulation which came into force on December 3, 2018, clearly prohibits geo-blocking and other geographically-based restrictions across Europe. Any tactics employed by traders which serve to undermine online shopping and cross-border sales across EU member states, are therefore clearly illegal. This regulation applies, among other goods, to PC video games distributed on CDs, DVDs but not to downloads.
The anti-trust proceedings which the Commission opened against Valve and the video game publishers reaffirm the objective of the regulation, namely that of allowing consumers to truly benefit from a digital single market.
Valve, via Steam, digitally distributes PC video games from each of the five PC video game publishers involved in the investigation. It also provides ‘activation keys’ to these publishers. These keys are required for consumers to play certain PC video games bought on channels other than Steam, that is, downloaded or purchased on physical media, such as a DVD. After the purchase of certain PC video games, users need to confirm their activation key on Steam to authenticate the game and be able to play it. This system is used for a wide range of games, including sports, simulation and action games.
The Commission is alleging that Valve and the video game publishers entered into bilateral agreements to prevent consumers from purchasing and using PC video games acquired elsewhere than in their country of residence. They did so by agreeing to use geo-blocked activation keys to prevent cross-border sales of PC video games from some member states, including in response to unsolicited consumer requests, that is, passive sales. Thus, consumers are being deterred from buying cheaper games available in other member states.
The video game publishers also included contractual export restrictions in their agreements with their distributors, other than Valve.
These distributors were prevented from selling the relevant PC video games outside the allocated territories. In its Statement of Objections, the Commission concluded that such business practices partitioned markets according to national borders and restricted passive sales to consumers.
Hence, they ultimately denied European consumers the benefits of the EU’s digital single market to shop around for the most attractive offer.
The Statement of Objections is yet another step in Commission investigations into suspected violations of EU antitrust rules. Though it is still early days for there to be a definitive ruling as to infringement or otherwise on the part of the parties involved, the Commission has made it clear that it will not tolerate any business practice which seeks to impede EU citizens from accessing goods and services online and this, irrespective of their nationality or place of residence.
One of the primary objectives of the EU’s single market – be it digital or otherwise – is to ensure more choice and better quality for consumers. Any attempts by traders to thwart this objective will therefore be halted by the Commission, be it by using its powers as the EU’s competition watchdog or through monitoring the enforcement of ad hoc legislation in all member states.
Mariosa Vella Cardona is a freelance legal consultant specialising in European law, competition law, consumer law and intellectual property law. She is also a visiting examiner at the University of Malta.
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