EU antitrust regulators just fined PC gaming giant Valve for restricting cross-border sales on Steam

Key Points
  • The EU has fined Valve and five other firms for restricting sales of video games based on the geographical location of users.
  • Valve allowed the publishers to distribute geo-blocked game codes for its distribution platform Steam, the EU said.
  • Valve, whose Steam platform is the biggest online PC game marketplace, said it plans to appeal the EU's decision.
In this photo illustration, the Steam application seen displayed on a iPhone.
Guillaume Payen | SOPA Images | LightRocket via Getty Images

LONDON — European antitrust regulators have fined Valve and five other PC game publishers a total of 7.8 million euros ($9.5 million) over a practice known as "geo-blocking."

Valve is most well known as the creator of the popular PC game store Steam.

The European Commission, the executive arm of the EU, said Wednesday that Valve and other publishers restricted sales of video games based on the geographical location of users. Such practices breach EU competition law.

The Commission said these practices were aimed at maintaining certain price differences between eastern and western European countries and blocking users from shopping around in the EU's single market.

The publishers include Japanese gaming giants Bandai Namco and Capcom, American firm ZeniMax — which owns the well-known game studio Bethesda Softworks — French developer Focus Home and German group Koch Media.

Fines for those publishers were reduced to a total of 6 million euros due to their cooperation with EU competition officials, the EU said. However, Valve was fined over 1.6 million euros for refusing to cooperate.

"Today's sanctions against the 'geo-blocking' practices of Valve and five PC video game publishers serve as a reminder that under EU competition law, companies are prohibited from contractually restricting cross-border sales," EU Competition Commissioner Margrethe Vestager said in a statement.

"Such practices deprive European consumers of the benefits of the EU Digital Single Market and of the opportunity to shop around for the most suitable offer in the EU."

Valve said it plans to appeal the decision.

"During the seven year investigation Valve has cooperated fully, providing all requested evidence and information to the Commission," Doug Lombardi, vice president of marketing at Valve, told CNBC.

"We disagree with these findings, and plan to appeal the decision."

What did Valve do?

According to the EU, Valve allowed five prominent PC game publishers to distribute geo-blocked game codes for its distribution platform Steam.

"Users located outside a designated Member State were prevented from activating a given PC video game with Steam activation keys," the Commission said.

Steam is a household name in PC gaming. It is the biggest online marketplace for PC games and generates the most revenues for Valve, which is also known for highly acclaimed game series like Half-Life and Portal.

The impact of the pandemic on video game industry growth
The impact of the pandemic on video game industry growth

Valve was founded in 1996 by former Microsoft employees Gabe Newell and Mike Harrington. The company has been privately owned since its inception.

The EU says Valve agreed bilateral deals with all the named publishers to issue Steam keys that prevented activation of certain games outside the Czech Republic, Poland, Hungary, Romania, Slovakia, Estonia, Latvia and Lithuania. These practices last between one and five years and were implemented between September 2010 and October 2015, according to the Commission.

Meanwhile, Bandai Namco, Focus Home, Koch Media and ZeniMax formed licensing and distribution agreements with clauses restricting cross-border sales of games, the EU added. The bloc said these deals tended to last longer — between three and 11 years — and occurred between March 2007 and November 2018.

The practices concerned around 100 PC games, according to the EU.

Why does it matter?

Vestager, Europe's top competition official, has made a name for herself taking on the biggest tech titans in the United States. Wednesday's news suggests she is now turning her attention to the massive video game sector.

The entire games market was expected to pull in revenues of $159.3 billion million in 2020, according to market research firm Newzoo. The PC gaming market would account for $36.9 billion, or 23%, of those revenues.

Video games have gotten a big boost from the coronavirus pandemic as people are spending more of their leisure time at home. The global video game market was bigger than the film industry and North American sports combined last year, according to a recent MarketWatch report.

It has also seen increased consolidation recently, with Microsoft buying Bethesda parent company ZeniMax — one of the firms fined by the EU — for $7.5 billion in cash. Bethesda is known for hit game franchises like Fallout and The Elder Scrolls.

Microsoft was not immediately available for comment on the EU fine when contacted by CNBC on Wednesday.