Popular Gaming Platform Accused of Abusing Market Power Through Contracts

Gamers have a new play — seeing how a federal judge will scrutinize the dealmaking behind a digital platform responsible for 75 percent of all PC games sales. On Thursday, five gamers filed a putative class action in California federal court against Valve Corporation.

“Valve Corporation’s Steam platform is the dominant platform for game developers to distribute and sell PC games in the United States,” states the complaint being handled by attorneys at Vorys Sater. “But the Steam platform does not maintain its dominance through better pricing than by rival platforms. Instead, Valve abuses the Steam platform’s market power by requiring game developers to enter into a ‘Most Favored Nations’ provision contained in the Steam Distribution Agreement whereby the game developers agree that the price of a PC game on the Steam platform will be the same price the game developers sell their PC games on other platforms.”

Legal attacks on MFN clauses aren’t completely new, although such contracts are now receiving newfound interest for the potential of being exclusionary and collusive. Last year, for example, the Department of Justice held a workshop on the topic.  The new suit tackles one popular digital platform with the charge that MFN clauses are keeping prices high on other platforms too including the Epic Games Store and the Microsoft Store at a time during a pandemic when gaming has exploded.

“The Steam MFN also hinders innovation by creating an artificial barrier to entry for platforms,” adds the complaint. “When a market, such as this one, is highly concentrated, a new entrant can benefit consumers by undercutting the incumbent’s prices. The ability to provide PC games to consumers at lower prices is one way a firm or new entrant could gain market share. If this market functioned properly—that is, if the Steam MFN did not exist and platforms were able to compete on price—platforms competing with Steam would be able to provide the same (or higher) margins to game developers while simultaneously providing lower prices to consumers.”

Valve didn’t immediately respond to an opportunity to comment. As the litigation plays on, a court may analyze whether the agreements are unreasonable and whether Valve is engaging in predatory conduct. The new suit comes just days after antitrust authorities in the E.U. fined Valve over “geo-blocking” practices.

Here’s the full complaint: