Wednesday, January 20th 2021

European Commission Fines Valve, Five Game Publishers in €7.8 Million for Regional Pricing and Geo-blocking Practices

The European Commission has issued a fine to Valve and five game publishers (Bandai Namco, Focus Home Interactive, Capcom, Koch Media, and ZeniMax after an antitrust probe decided the companies violated EU antitrust laws. The Commission investigated regional pricing and geo-blocking practices that were put in place by valve and the hitherto fined publishers, and says that these rule-breaking pricing manipulations resulted from bilateral agreements between game publishers and Valve between 2010 and 2015, as well as from purpose-built licensing and distribution licenses between four out of five fined publishers between 2007 and 2018.

The European Commission found these practices to relieve "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". In particular, the offendants sold video game licenses relative to some 100 different titles at lower pricing in certain Eastern Europe countries, and which could not be activated in Western Europe. The fine's total amount of €7.8 million is shared between Valve (€1,624,000); Bandai Namco (10% fine reduction for cooperation, €340,000); Capcom (15% fine reduction for cooperation, €396,000); Focus Home Interactive (10% fine reduction for cooperation, €2,888,000); Koch Media (10% fine reduction for cooperation, €977,000), and ZeniMax (10% fine reduction for cooperation, €1,664,000). Valve didn't receive any fine reduction because the company elected not to cooperate with the Commission.
Executive Vice-President Margrethe Vestager, in charge of competition policy, said in a statement:
More than 50% of all Europeans play video games. The videogame industry in Europe is thriving and it is now worth over € 17 billion. 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. 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.
Of course, while this money will come directly out of pocket from the convicted companies, what this does in practice is that these companies will likely no longer provide videogames at discounted prices for countries with lower purchasing power (and, one might argue, at pricing that better reflects those citizen's purchasing power, which as we all know, vary from country to country). If history has shown us anything is that companies will almost never take the road of lowering the purchase price towards the lowest bar, but the opposite, thus potentially turning games into luxury commodities that are only reserved for the few lucky enough to have been born in a country with a higher minimum wage.
Source: European Commission
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35 Comments on European Commission Fines Valve, Five Game Publishers in €7.8 Million for Regional Pricing and Geo-blocking Practices

#1
ExcuseMeWtf
thus potentially turning games into luxury commodities that are only reserved for the few lucky enough to have been born in a country with a higher minimum wage.
Pretty sure minimum wage earners in such countries have much more pressing issues than AAA games' pricing at/near launch.
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#2
kapone32
It would make much more sense if the EU made these companies pay tax like existing(ed) brick and mortar operations.
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#3
DeathtoGnomes
kapone32
It would make much more sense if the EU made these companies pay tax like existing(ed) brick and mortar operations.
In the USA valve does charge state and, I think, local taxes.
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#4
windwhirl
kapone32
It would make much more sense if the EU made these companies pay tax like existing(ed) brick and mortar operations.
That'd be easy to fix if the companies refuse to pay themselves. Just add the tax charge to the transaction in the credit card balance through a regulation of some sort. Already done here with Netflix and others.
DeathtoGnomes
In the USA valve does charge state and, I think, local taxes.
Yeah, but the EU wants money too.
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#5
RH92
ExcuseMeWtf
Pretty sure minimum wage earners in such countries have much more pressing issues than AAA games' pricing at/near launch.
Pretty sure minimum wage earners in such countries have kids/family asking for said AAA titles , ofc not the most pressing priority but you know how life goes so i don't see how they are less concerned than the rest of the population .
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#8
kapone32
DeathtoGnomes
In the USA valve does charge state and, I think, local taxes.
That is good. The issue I have with this is that objectively this was a Good thing for those economies as some of them have no real economy to support luxury items like AAA Games.
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#9
windwhirl
Chomiq
If they charge VAT in EU they must have an office in each individual country and have to pay taxes here.
www.avalara.com/vatlive/en/eu-vat-rules/distance-selling/distance-selling-eu-vat-thresholds.html
That wasn't what I meant, sorry, my comment before will get an edit later. In Argentina, most popular subscription services (Netflix, Spotify, etc.) do not have an office in the country. So the government decided to add the tax charge straight into the cards' balances. The tax is collected by the bank when you pay the balance or in debit card cases, when you make the transaction.

Somewhat unrelated but a good enough example: I paid Patreon through Paypal, so I got a charge for the transaction itself (7 dollars, or AR$ 628) plus two tax charges due to regulations on foreign currency. The tax was charged the moment I made the transaction and the funds collected at that very moment.

The EU countries could push for regulations/laws allowing them to do the same, if they're that desperate for tax money.

Granted, depending on how the tax system works, that could very well distort prices even more.
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#10
lexluthermiester
DeathtoGnomes
In the USA valve does charge state and, I think, local taxes.
No, just state taxes.
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#11
qlum
Just to be clear, the EU doesn't ban companies from setting their own prices, it just requires no barriers to exist within the Union.
Free movement of goods / services and people, is pretty much at the core of the EU.
It would be the same as having different prices between states in the US and then denying that people buy it from the store in another state.

Of course this means that some people will have to pay more for their games, but in principle this is just one of those things that have to be done.
It's not like you have to buy a game full price anyway. I, for one, rarely pay more than €20 for my games. Ultimately it's the same game, produced at the same costs.

If they really wanted to go down that route, they could have a cheaper Polish version for example, only playable in polish. This would be perfectly fine, denying someone from Luxembourg to buy it is not.
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#12
Sithaer
qlum
Just to be clear, the EU doesn't ban companies from setting their own prices, it just requires no barriers to exist within the Union.
Free movement of goods / services and people, is pretty much at the core of the EU.
It would be the same as having different prices between states in the US and then denying that people buy it from the store in another state.

Of course this means that some people will have to pay more for their games, but in principle this is just one of those things that have to be done.
It's not like you have to buy a game full price anyway. I, for one, rarely pay more than €20 for my games. Ultimately it's the same game, produced at the same costs.

If they really wanted to go down that route, they could have a cheaper Polish version for example, only playable in polish. This would be perfectly fine, denying someone from Luxembourg to buy it is not.
I also rarely buy fully priced games on Steam as they are kinda expensive compared to what the average person 'like me and my family' makes here in my country. '500-600$/month is fairly normal/average here from a full time job'

Usually buy during sales or buy games on EPIC with coupons/GoG sales are fine too.

At most I allow myself 1-2 full priced AAA games/year if theres something I'm that interested in.

From what I heard and read this was also a popular thing in my country to buy from other countries on Steam to get the games cheaper I just never really did it myself.
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#13
Trovaricon
Chomiq
If they charge VAT in EU they must have an office in each individual country and have to pay taxes here after crossing specific threshold set for each country.
www.avalara.com/vatlive/en/eu-vat-rules/distance-selling/distance-selling-eu-vat-thresholds.html
No they don't.
They can submit whole "EU" tax (vat) report to any EU country (single) tax office: www.avalara.com/vatlive/en/eu-vat-rules/distance-selling/non-eu-companies-vat-on-electronic-services-books-video-apps-and-software.html
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#14
Kohl Baas
In my country, we have about 25% VAT. Germany AFAIK has about 19%. Since whatever of February 201x the EU has a dunnowhat that states that every digital purchase has to be taxed with the ammounth and towards the country of the purchaser. That means that if I buy a game for 60€ on Steam and a German guy does the same, I got the game itself 6% cheaper, athough we pay exactly the same amount.

On the other hand, my vage (which is far from the minimal and I have a quite sable employment in the building industry) about ~600€/mo. Which makes aquiring AAA titles in a legally straight manner quite a luxurious hobby. Thank god you can't afford a system that could run a AAA game on the level to make it worth buying in the first place... /s

I remember saving up for my Vega64 about 4 years ago... With the waterblack, it was about 2 months payment. I really liked to build semi-high-end PCs, but thanks to everything, in the last 3 years, my hobby of 20 years has left me on the sidetracks...

At leas I have my Steam account full of B-AAA games of the past to play in the next 10 years...
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#15
Robin Seina
Those fines are ridiculously low. You only need to look at those companies profit to understand that.
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#16
Lomskij
As fines get reduced for cooperation, they should be increased for non-cooperation :-D
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#17
quakebox
Europe is comprised of different countries it's not a single nation so for the EU to jump every while and then is comical.
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#18
windwhirl
Robin Seina
Those fines are ridiculously low. You only need to look at those companies profit to understand that.
The things they're being fined for are not that terrible. Fines must be reasonable.
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#19
lexluthermiester
windwhirl
The things they're being fined for are not that terrible. Fines must be reasonable.
I have to disagree. An abuse of power, regardless of the degree to which it was applied, is a serious problem. It needs firm action, leaning on the side of harsh. I don't think the fine was big enough.

Selectively gouging the public is a wildly inappropriate form of discrimination and must NOT be tolerated.
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#20
Easo
Steam is this funny thing were Baltics are together with Russia, Ukraine, Belarus, etc., and purchases are region locked (not entirely sure how it works) yet we have the standard EU prices (so 60 EUR for the standard game) while they do not. ¯\_(ツ)_/¯

Gaben can eat this fine easily. Question is, will Valve try to ignore the ruling? Because EU will not screw around and will have no issue giving out the second one, which would be larger.
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#23
Aquinus
Resident Wat-man
DeathtoGnomes
In the USA valve does charge state and, I think, local taxes.
Thank goodness I live in the glorious state of New Hampshire which has no sales or income tax.
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#24
Metroid
Well deserved, valve has been doing that bs for years, is time to put a stop on it.
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#25
windwhirl
Easo
Gaben can eat this fine easily. Question is, will Valve try to ignore the ruling? Because EU will not screw around and will have no issue giving out the second one, which would be larger.
Unlikely. Valve and Gaben are not gonna try to ignore the ruling, unless they have a very convincing argument to make in the courts (or wherever they may dispute the fine in Europe), which I don't think they do.
lexluthermiester
I have to disagree. An abuse of power, regardless of the degree to which it was applied, is a serious problem. It needs firm action, leaning on the side of harsh. I don't think the fine was big enough.

Selectively gouging the public is a wildly inappropriate form of discrimination and must NOT be tolerated.
That's fine and I agree with that to a certain point. I just think that fines must be reasonable, not too high nor too low. Remember, when the bean counters see the numbers, the first to go are usually the employees, so that's why it's not a good idea to just rise the fines to the heavens.

On that topic, I actually wanted to know the impact of this fine on the companies involved. Most of these companies are not publicly traded, but there's the Embracer Group that owns Koch Media (among other companies like Saber Interactive, THQ Nordic or Deep Silver). So I dug up the group's latest consolidated income statement (I couldn't find one for Koch Media), which you may find here, which reports 283.3 million SEK of net profit (or almost 34 million USD). Considering the €977,000 fine (almost 1.2 million USD), that's around 3.5% of profit lost to a fine. I'm not saying it's a lot of money, but it's not as ridiculously low as someone assumed, considering those 34 million USD are the profit of the whole group that owns Koch Media among a bunch of other companies, and in theory this fine is for the transgression of just one of those companies. Suppose that every single one is guilty of the same thing and the fines piling up could make quite the number.

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