Last week Gordon and Nettle JJ of the High Court of Australia scuttled Valve’s special leave application to appeal against last year’s judgment of the Full Court of the Federal Court. The case was concerned with whether Valve was required to comply with Australian consumer protection laws in its operation of the ubiquitous online gaming distribution platform, Steam.
Valve is a US based company which develops popular computer games and operates Steam, an online digital marketplace for computer games. The platform is accessible all around the world, including Australia, and allows customers to purchase and download computer games. The Steam platform is enormously popular, dwarfing its competitors in the industry. In 2013 Bloomberg reported it had an estimated 75% share of the digital distribution market. The platform has over 150 million users worldwide, and over 2 million accounts in Australia.
As suggested by its name, all of the products purchased through Steam are downloaded from the cloud. It is wholly a digital marketplace: consumers enter their credit card details, purchase a game, and download it. Between 2011 and 2014, Valve’s terms of service for the platform stated that customers were not entitled to refunds on these digital products.
This caught the eye of the ACCC, who brought proceedings against Valve for making false or misleading representations to consumers about their rights. The Australian Consumer Law requires goods to be of an acceptable quality and fit for purpose. If they do meet this standard, a consumer is entitled to a remedy which, depending on the circumstances, will include a refund. A company cannot contract out of these statutory rights with a customer – they will always apply.
The trial at first instance was heard in the Federal Court by Edelman J, who has since been elevated to the High Court. His Honour found that, with respect to the Australian Consumer Law, “Valve’s culture of compliance was, and is, very poor”. This was because they had “formed a view … that it was not subject to Australian law”.
His Honour found that this view was so strong that “even if advice had been obtained [about the application of Australian law] the advice might have been ignored”. His Honour found in favour of the ACCC, concluding that as Steam was operated in Australia, the Australian consumer protections applied. Fines of $3 million were imposed.
In December 2017, Valve appealed to the Full Court of the Federal Court, which unanimously affirmed Edelman J’s decision. Valve elected to take the matter to the final level: an appeal to the High Court of Australia.
Valve runs out of lives
Appeals to the High Court are not as of right, and applicants must convince the Court that special reasons exist to be granted leave to appeal. In recent years there has been a trend for the High Court to increasingly resolve special leave applications “on the papers” as opposed to through a short hearing.
This is what occurred with Valve’s special leave application, which was unceremoniously dismissed by Gordon and Nettle JJ. The Court’s disposition published last week simply noted that their honours “see no reason to doubt the correctness of the decision of the Full Court” and that an appeal “would not enjoy sufficient prospects of success to warrant the grant of special leave”. Accordingly, the special leave application was dismissed with costs against Valve.
This has brought Valve’s options for appeal to an end, and they are liable to pay the approximately $3 million in penalties. Valve has long since changed its offending global refund policy, to allow customers to get a refund on their games within 14 days of purchase so long as they have been played for less than 2 hours (with their support team able to issue refunds outside of this where the circumstances require it).
In any case, the Valve saga has made it abundantly clear that the Australian Consumer Law is not just hot air to overseas companies. That is, even if you do not have a presence in Australia, if you sell goods to Australian customers (even digital only goods) you must abide by the consumer protections.
International policies must be brought in line with Australia’s strict laws on the matter. This is all the more so relevant now, as in the wake of the royal commission into banking, ACCC Chairman Rod Sims is pushing for “massively” higher penalties for corporate breaches of consumer law. McCabes has expertise on advising both domestic and international clients on their compliance with Australia’s competition and consumer laws.