EU fines for gaming companies for unjustified geo-blocking

Out-Law News | 26 Jan 2021 | 3:52 pm |

The European Commission has issued fines totalling €7.8 million to six publishers for restricting cross-border sales of video games based on their geographical location.

The fines were issued for violation of EU competition law, and follow an investigation launched in February 2017. The Commission said the investigation also complemented an EU regulation on unjustified geo-blocking, which came into force in December 2018 and is intended to enable consumers to access goods and services wherever in the EU they are based.  The geo-blocking legislation was drawn up after an e-commerce sector inquiry in 2016 found that agreements between suppliers and distributors could restrict competition in the European single market.

Stammwitz Laura_April-2020

Dr. Laura A. Stammwitz

Rechtsanwältin, Senior Associate

Companies should take this decision as an opportunity to review their e-commerce related practices within the European market and assess on a case-by-case basis whether any identified restriction could be justified in the particular situation

The Commission's investigation focused on gaming company Valve, which operates online video gaming platform Steam, and five publishers which had granted Valve a non-exclusive licence to exploit specified games on a worldwide basis. The publishers obtained from Valve a licence for the use of Steam activation keys for distribution of those games outside Steam, and asked Valve to set up geographical restrictions and to provide geo-blocked Steam activation keys.

They then provided those keys to their distributors for sale and distribution of the games in a number of EU member states in central and eastern Europe. As a result, users located outside those countries were prevented from activating a given game with Steam activation keys.

The Commission found the agreements between Valve and the publishers partitioned the European market in violation of EU antitrust rules. Valve was fined €1.6m after the company chose not to cooperate with the Commission. The five publishers did cooperate and received discounted fines depending on the extent of their cooperation, with the amounts ranging from €340,000 to €2.9m.

Competition law expert Laura Stammwitz of Pinsent Masons, the law firm behind Out-Law, said: “This investigation stems from the Commission’s insights gained from its e-commerce sector inquiry back in 2016 bringing to light that almost 60% of the digital content providers surveyed have contractually agreed with rights holders to geo-block.”

Stammwitz said companies operating online within the EU should take note of the decision. “If not already done so after the sector inquiry, companies should take this decision as an opportunity to review their e-commerce related practices within the European market and assess on a case-by-case basis whether any identified restriction could be justified in the particular situation. If necessary, distribution strategies have to be adjusted to comply with European competition law,” Stammwitz said.


Nils Rauer, also of Pinsent Masons, who is an expert in the EU's digital single market agenda, said: “It is important to note that the Commission’s decision rests on general competition law rather than on the new Geo-blocking Regulation. That Regulation prohibits discrimination against consumers based on their nationality, place of residence or establishment when they buy goods or services.”

Rauer said that, in spite of the Commission's decision, it is not a breach of EU law to apply territorial licenses to copyright-protected works. Rauer said: “Even in the light of an increased harmonisation of European copyright law, pan-European licenses are no must." He said their need depends on whether territorial restrictions imposed on third parties are legitimate or not.

The European Commission has previously issued fines against companies including clothing retailer Guess and sporting giant Nike for breaching EU competition law by restricting online sales, but the Valve case is believed to be the first decision specifically addressing a geo-blocking agreement.