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Valve Loses Bid to End Antitrust Case Over Steam Gaming Platform

May 9, 2022, 3:10 PM

Valve Corp. must face antitrust litigation over claims that “most favored nation” policies for its Steam distribution platform have driven up video game prices across the industry, a federal judge in Seattle ruled.

Judge John C. Coughenour let part of the case move forward in the U.S. District Court for the Western District of Washington, saying it’s plausible Valve exploits its market dominance to threaten and retaliate against developers that sell games for less through other retailers or platforms.

The company “allegedly enforces this regime through a combination of written and unwritten rules” imposing its own conditions on how even “non-Steam-enabled games are sold and priced,” Coughenour wrote. “These allegations are sufficient to plausibly allege unlawful conduct.”

The May 6 decision hands a win to the consumers and game publishers leading the proposed class action after the judge twice issued preliminary rulings in Valve’s favor.

Coughenour first ordered Steam subscribers to arbitrate their consumer claims in October, then tentatively dismissed the developer lawsuit the following month. Consumers who don’t subscribe to Steam—and never signed its arbitration agreement—are still involved in the case.

The consolidated dispute is one of several legal challenges to the standard 30% commission taken by leading sales and app distribution platforms across Silicon Valley.

The allegations echo claims that Amazon.com Inc. uses most-favored-nation-style policies to hike the price of “virtually all products offered for sale” online in the U.S. The Amazon cases include one focused on eBooks and another brought by the attorney general of Washington, D.C.

The Steam suit also resembles a wave of cases over Apple Inc.'s App Store and Alphabet Inc.'s Google Play Store, although their legal theories differ. Apple has settled a developer lawsuit for $100 million, and it’s appealing a court order requiring costly changes to the App Store.

Coughenour trimmed the Valve case May 6, rejecting claims that the Steam store and gaming platform operate in separate markets the company ties together. There are no plausible allegations of any consumer demand for “fully functional gaming platforms distinct from game stores,” he said.

But the judge let the most-favored-nation claims move forward, walking back his earlier skepticism about the idea that Steam commissions are “supracompetitive.” He had previously found that their stability over time shows Valve didn’t raise prices as it gained market share.

In fact, when the company competed only against brick-and-mortar retailers, it “did not need market power to charge a fee well above its cost structure because those brick-and-mortar competitors had a far higher cost structure,” Coughenour wrote. That makes the analysis apples-to-oranges, he said.

The developers are represented by Constantine Cannon LLP. The consumers are represented by Quinn Emanuel Urquhart & Sullivan LLP and Vorys, Sater, Seymour & Pease LLP.

Valve is represented by Fox Rothschild LLP and Montgomery McCracken Walker & Rhoads LLP.

The case is Wolfire Games LLC v. Valve Corp., W.D. Wash., No. 21-cv-563, 5/6/22.

To contact the reporter on this story: Mike Leonard in Washington at mleonard@bloomberglaw.com

To contact the editor responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com

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