The European Commission has imposed a 7,8 million euro fine to Valve, owner of the online PC gaming platform “Steam”, and five video game distributors for violating European geoblocking rules. Valve and the affected distributors restricted cross-border sales of certain video games based on the geographic location of consumers, which is exactly what is prohibited under the geoblocking regulation.
What is geoblocking?
As part of its Digital Single Market package, the so-called geoblocking Regulation has been in force in the EU since 2019. With this Geoblocking Regulation, the EU wants to put an end to any discrimination based on consumers’ place of residence or location. Research by the EU over the past years had shown that very often residents of a certain country could not enjoy certain offers online because they were denied access to a website based on their location or IP address or because they were automatically redirected to another country version of that website.
The classic example is when an airline passenger wants to book an airplane ticket on a flight from, for example, Berlin to Brussels. Anyone who tries to access the website of the relevant airline from Germany will find an offer, let us say, 59 euros. However, anyone who tries to book the same ticket from Belgium is automatically diverted to a Belgian website, where the same ticket is considerably more expensive, or simply cannot access the German website. That is exactly what the EU wants to prevent with the Geoblocking Regulation.
The regulation contains a set of rules that restricts both the technical limitation of access for foreign buyers to a website and the practical impediment or disabling of purchases on a website by foreigners.
What is no longer allowed since the beginning of 2019?
- Making access to websites technically impossible from another country (pure geoblocking)
- Making access to websites or to the products offered on this website more difficult or impossible “in any other way” (this is the case, for example, when a buyer cannot fill in the order because the format of the input fields do not allow this, especially in the zip code shows this regularly are problematic because it requires a pre-formatted format)
- Redirection of website visitors to a local version of the website without prior consent
- Use of price differences based on the buyer’s origin (unless there is an objective justification for this)
- Use of different sales conditions depending on the buyer’s place of residence or residence (unless there is an objective justification for this).
- Refusal to sell based on place of residence or residence (what is still allowed however is limiting delivery to certain areas, but the buyer who is willing to accept the limited delivery options must always be able to purchase)
- Discrimination against buyers on the basis of the means of payment offered (this is in this case the systematic refusal of, for example, credit cards issued in another country)
What was Valve doing wrong?
Commissioner Margrethe Vestager, responsible for competition policy, said: “More than 50% of all Europeans play video games. The video game industry in Europe is thriving and is now worth more than € 17 billion. Today’s sanctions against the “geoblocking” practices of Valve and five PC video game publishers are a reminder that EU competition law prohibits companies from contractually restricting cross-border sales. Such practices deprive European consumers of the benefits of the EU Digital Single Market and the ability to search for the most suitable offer in the EU ”.
Steam is one of the world’s largest online games platforms, where users can stream or download games. Games purchased outside of Steam (eg in physical stores or via downloads from third party websites) from third parties can also be activated and played on Steam. Valve also offers game distributors a territory control function, which makes it possible to set certain geographic restrictions when activating games. Precisely these limitations result in the active geoblocking of games based on the geographic location of the user. The reason for this was mainly to divide the territory between each of the distributors involved. As a result, users outside of a designated member state were unable to activate certain games with Steam activation keys.
The Commission found that Valve is thereby de facto splitting up the market in a manner contrary to European competition law and in particular that Valve and the relevant distributors were guilty of the following geoblocking practices:
- Bilateral agreements and / or concerted practices between Valve and implemented each of the affected distributors through geo-blocked Steam activation keys that allow the activation of certain video games from these publishers outside the Czech Republic, Poland, Hungary, Romania, Slovakia, Estonia, Latvia and Lithuania, in response to unsolicited consumer requests (the so-called “passive sales”). These lasted between one and five years and were implemented between September 2010 and October 2015, depending on the case.
- geoblocking practices in the form of licensing and distribution agreements concluded bilaterally between four of the five distributors involved (Bandai, Focus Home, Koch Media and ZeniMax) and some of their respective distributors in the EU, which contained clauses restricting the cross-border (passive) sales of the concerned games within the EU. These generally lasted longer, ie between three and eleven years, and were implemented between March 2007 and November 2018, depending on each bilateral relationship.
Avoid geoblocking issues on your own website
Not only International distributors of online games should be careful with geoblocking. The rules apply to every website and webshop in Europe.
Therefore, check your website at least on the following points:
- Is your website freely accessible from the entire EU?
- If you use a redirect, does the visitor have the choice to stay on the chosen country version (and to order there at the price offered there)?
- Do your terms and conditions of sale contain no dissimilar conditions depending on the place of residence or residence (price, guarantee, dispute settlement, reflection period, …)
- Are you sure that your payment solutions do not discriminate in function of the place of issue of payment cards and / or the residence or residence of the buyer?
- Are you sure that your order forms are location-neutral and allow the local composition of address data, in particular, in the address fields?