On 27 September 2023, the EU’s General Court (GC) rejected an appeal brought by Valve Corporation (Valve) against the European Commission (Commission) decision of 20 January 2021 (Contested Decision) that Valve had breached EU competition law under Article 101 TFEU and Article 53 EEA Agreement for geo-blocking. Valve was fined over EUR 1.6 million in 2021 following the Commission’s investigation which began in 2013. 

Under the Contested Decision, Valve was found to have infringed Article 101 TFEU and Article 53 EEA Agreement by geo-blocking Steam activation keys (Steam Key(s)) for certain video games published by five video game publishers (Publisher(s)) in order to restrict cross-border sales of those video games within the EU.

The relationship between Valve and the Publishers is illustrated in the diagram below.

Key Takeaways from the GC’s Judgment

Agreement/concerted practice: The GC found that the Commission had correctly established the existence of an agreement or a concerted practice between Valve and the Publishers. The GC considered that the purpose of the geo-blocking suggested by Valve was to prevent Steam Games, which are distributed in certain territories at low prices, from being purchased at those lower prices by users located in other territories where the prices are much higher. This had the effect of eliminating parallel imports of the Steam Games thereby increasing royalties collected by the Publishers and the margins earned by Valve. Valve argued it was merely implementing a technical measure at the Publishers’ request: that the geo-blocking was put in place by the Publishers unilaterally, and as such Valve was merely supplying the Publishers with a resource and was not part of an agreement or concerted practice to restrict competition. This argument was rejected by the GC.

Rather, the GC considered Valve’s complicity in the ‘agreement’. To further illustrate this, the GC referred to email exchanges with the Publishers which were examined as part of the Contested Decision. In these exchanges, Valve proactively recommended that geo-blocking Steam Games could be used as a means of preventing parallel imports. These suggestions were subsequently implemented by each of the Publishers. Overall, the GC found there was sufficient evidence to conclude that Valve was or ought to have been aware that the real objective of the geo-blocking feature was to restrict passive sales and thereby to restrict competition.

Anti-competitive behaviour is not just about consumers: The GC also clarified that such behaviour did not necessarily need to deprive final consumers of effective competition in order to be determined as anti-competitive ‘by object’. The GC’s approach was to view geo-blocking holistically as a threat to the internal market and the associated economic freedoms enshrined in the EU’s founding Treaties. 

Copyright vs Competition?: The GC also ruled that, in relation to EU competition law, copyright is not to be interpreted as a guarantee for the highest possible payment at all times. The GC went on to address intellectual property laws and its interaction with competition law, explaining that the former cannot be used as a shield for the latter. The judgment did not go so far as to dismiss the intellectual property regime in favour of competition, however, commentators have noted a trend in that general direction. 

The GC explained that copyright is intended to protect the right to commercially exploit the marketing of, or to control the availability of, protected subject matter. What it is not, is a right to obtain the highest possible payment for that protected subject matter at all times. 

Valve and the Publishers had rendered it practically impossible for the geo-blocked Steam Keys to be activated outside of the restricted territories. It was observed by the GC that the use of geo-blocking in this instance was not as a means to protect Publishers’ copyright, but to: (i) prevent parallel imports, which the GC considered to be a restriction of competition ‘by object’; and (ii) allow Valve and the Publishers to gain a financial advantage.

Emphasis on the conduct itself: Emphasis was placed on the conduct itself and not necessarily the nature of relationships between the parties, the goods in question, the IP regime in place, or the number of sales affected. In this case, Valve’s argument that it was merely implementing a technical measure at the request of a client was not an adequate excuse as the overall effect was to restrict competition.

Snap-shot analysis

The judgment is interesting for several reasons:

1. It highlights the single market imperative, which remains alive and well. Restricting parallel trade is a serious issue at EU level because of the Treaty’s objective of integration of the single market. 
2. The GC delved into the complex area of the relationship between competition law and intellectual property, highlighting the fact that intellectual property cannot be used a shield to protect businesses from the application of competition law principles. 
3. The judgment underlines that the Court will look closely at evidence underpinning and supporting the ‘real’ purpose of an ‘agreement’ or ‘concerted practice’ between businesses. Therefore, the words in the written agreement are not sufficient if they are not backed up by what is said between businesses internally. 
4. Depriving consumers of effective competition is not the only measure that is considered by the Courts when determining the purpose of competition law and whether a measure restricts competition by object. 

The Commission has had geo-blocking as a focal point for a decade. Its investigations into geo-blocking of PC video games complement the Geo-Blocking Regulations from 2020, which aim to address forms of discrimination based on a customer’s nationality, place of residence or establishment within the internal market.

Given the wealth of evidence against Valve showing it was knowingly recommending anti-competitive strategies to increase revenue for all parties involved, and the Publishers’ ready acceptance of the Contested Decision, it is interesting that Valve decided to appeal the decision the GC in the first place - particularly in relation to the notions of what constitutes an ‘agreement’.

It is possible that Valve was emboldened by the CJEU judgment in Canal+ which came a year earlier. In this case, the CJEU annulled a General Court decision on the grounds of proportionality, concluding that the Commission investigation and decision in question failed to consider the impact on third parties such as Canal+, which had suffered consequential losses as a result of the Commission decision. However, the difference here is that Valve was very much a part of the investigation which led to the Contested Decision and this judgment. 

Valve has not yet announced whether it will appeal this judgment to the CJEU. It remains to be seen whether it will be game on or game over for Valve in the EU courts. 

Update (Jan 2024): Valve has not appealed the General Court decision - so it is indeed game over for Valve in the EU courts.

If you need more information or further guidance in this area, please contact Dr Saskia King, Quinn Liang, Laura Horwich. 

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