{"id":9412,"date":"2024-11-06T13:09:02","date_gmt":"2024-11-06T13:09:02","guid":{"rendered":"https:\/\/journals.law.unc.edu\/ncjolt\/?p=9412"},"modified":"2024-11-06T13:09:02","modified_gmt":"2024-11-06T13:09:02","slug":"full-steam-ahead-how-epic-games-recent-lawsuits-will-affect-valve-and-digital-storefronts","status":"publish","type":"post","link":"https:\/\/journals.law.unc.edu\/ncjolt\/blogs\/full-steam-ahead-how-epic-games-recent-lawsuits-will-affect-valve-and-digital-storefronts\/","title":{"rendered":"Full Steam Ahead: How Epic Games\u2019 Recent Lawsuits will Affect Valve and Digital Storefronts"},"content":{"rendered":"\n
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https:\/\/pixabay.com\/illustrations\/video-game-stand-stall-market-7289203\/<\/figcaption><\/figure>\n\n\n\n

A new flavor of antitrust suit in the video games industry has arisen against digital storefronts after Epic Games waged war against Apple and Google earlier this year. More recently, a class action lawsuit<\/a> has been made against Valve and their digital storefront Steam alleging anti-competitive practices and federal antitrust violations surrounding their most favored nations clause, and Epic Games stands to gain against their video game digital storefront rival. <\/p>\n\n\n\n

  In 2020, Epic Games began offering a bypass<\/a> to in-game purchases on the IOS and Google Play Store for their hit game Fortnite. Players could buy premium in-game currency from Apple or buy from Epic directly at a cheaper price. Epic alleged that the price difference was to account for Apple\u2019s 30% revenue cut from all purchases.<\/p>\n\n\n\n

This maneuver was part of a larger project dubbed \u201cProject Liberty\u201d where Epic Games founder and CEO Tim Sweeney stated, \u201cwe\u2019re fighting for the freedom of people who bought smartphones to install apps from sources of their choosing, the freedom for creators of apps to distribute them as they choose, and the freedom of both groups to do business directly.\u201d Apple responded by blocking Fortnite from the App Store, which started the legal action. The main thrust of Epic\u2019s argument was Apple\u2019s monopoly power and anticompetitive behavior over the IOS store. By January 2024, it was fully decided that Apple did not have a monopoly over the IOS store<\/a>, though Epic prevailed on anti-steering claims, as Apple is currently not allowed to prevent developers from informing users of other payment systems.<\/p>\n\n\n\n

While some have characterized Epic\u2019s lawsuit with Google as \u201canother bite at the apple,\u201d it was not really due to Epic\u2019s differing legal strategy. While couched in the same project of lowering the revenue cut that digital storefronts take, Epic instead claimed that Google violated antitrust laws<\/a> by making the Google Play Store the only digital storefront developers could publish on and forced the Google Play Store on all Android devices. Epic did prevail, and Google received a permanent injunction to allow for alternative app stores on Android devices, though as of October 2024, Google is currently appealing the decision.<\/p>\n\n\n\n

It is no surprise that Epic has laid the groundwork for others file suit against Valve and Steam through its own lawsuits against Apple and Google, especially through its emphasis on the exorbitant 30% revenue cut digital storefronts are taking from hardworking developers.<\/p><\/blockquote>\n\n\n\n

In August 2024, a class action lawsuit was filed against Valve and their digital storefront Steam<\/a>. The complaint alleges violations of antitrust laws, and more specifically that Valve\u2019s platform most-favored-nations clause (\u201cPFMN\u201d) has created anti-competitive pricing and has destroyed competitors. \u201cValve\u2019s PMFN prevents any publisher that sells a game on Steam from either (a) selling that game on a rival platform for a lower price (price parity), or (b) providing additional game content or enhancements on a rival platform (content parity).\u201d Not only does Valve take a 30% revenue cut, but they also forbid anyone from selling the game for less money, even if other platforms have a lower percentage cut. This means that the lower revenue cut and subsequent cheaper price for the game cannot be avenues for competition for rival digital storefronts. <\/p>\n\n\n\n

In another class action lawsuit against Valve<\/a>, claims that the PFMN regime used by Valve supported anticompetitive objectives by \u201c\u2018prevent[ing] price competition from rival storefronts,\u2019 resulting in higher prices for those games and less competition in the broader PC game distribution market\u201d survived a motion to dismiss However, the suit was partially dismissed because Valve had traditionally always taken a 30% revenue cut even before they captured a substantial share of the PC games market, so it was difficult to allege a harm.<\/p>\n\n\n\n

Most favored nation provisions tend to be seen as anticompetitive when they ultimately raise prices for the end consumers<\/a>. The question is whether forbidding the price of a game to fluctuate ultimately leads to higher prices in the long run. Epic would argue that it does because it prevents their platform from selling at a lower base price\u2014but technically, preventing a price from dropping and artificially raising them after gaining substantial market share are two different things.<\/p>\n\n\n\n

If I were to predict the outcome of the complaint based on the non-binding precedent Epic has created, the PFMN clause should be struck down or at the very least, modified. The outcomes of both Epic lawsuits seem to signal the courts\u2019 willingness to attack specific and insular anti-competitive behaviors and unwillingness to strike down arguments couched in the anticompetitive nature of simply owning a dominant digital storefront. At the very least, I would expect the PFMN clause to be modified to allow developers to advertise sales of their games on different platforms, and they would be incentivized to do so if those platforms gave them greater revenue per sale of their games, as is consistent with both Epic v. Apple<\/em> and Epic v. Google<\/em>. At the most extreme, the PFMN clause would be considered anticompetitive because it ultimately raises prices for consumers and would be removed.\u00a0 It is important to note that the Epic Games Store is arguably the most significant rival to the Steam Store, and much of this seems largely strategic. \u201cProject Liberty\u201d benefits Epic as a digital storefront in its rivalry with Steam, not just as a developer against Apple and Google. The Epic Games Store currently operates with a 12% revenue cut, which was meant to show that it is commercially viable to sell games without pocketing a large revenue cut. The Epic Games Store is also attempting to control more of the market in other ways\u2014namely by taking advantage of the network effect.<\/p>\n\n\n\n

The network effect<\/a> refers to the idea that the more people use a product, the more value it has, even if the product\u2019s base value is low, and the network effect\u2019s influence on market power has led to antitrust lawsuits. Both Epic and Valve have tried to capture more of the market by distributing a wide variety of games and have even promoted syncing across different distributors (including each other!) to make accessing all your games in one place easy. If a user can access all the games they want in one place, they are more likely to stay with that distributor. Epic Games has attempted to capitalize on this through permanent and timed exclusives, though they face an uphill battle simply because Steam has been around for longer. If the PFMN clause is destroyed or modified, the price of games can fluctuate, and Epic can force Valve to compete. <\/p>\n\n\n\n

Thus, it is no surprise that Epic has laid the groundwork for others file suit against Valve and Steam through its own lawsuits against Apple and Google, especially through its emphasis on the exorbitant 30% revenue cut digital storefronts are taking from hardworking developers.<\/p>\n\n\n\n

Vaishnavi Muruganandam<\/strong><\/p>\n\n\n\n

Vaishnavi Muruganandam is a second-year law student that is most likely de-stressing by reading, knitting, crocheting, and yes, playing video games. She attended American University for undergrad and majored in Political Science, concentrating in political philosophy and economics, as well as playing rugby for AUWRFC. In law school, Vaishnavi has been involved in the Carolina Intellectual Property Law Association (CIPLA) and the Asian American Law Students Association (AALSA).<\/p>\n","protected":false},"excerpt":{"rendered":"

A new flavor of antitrust suit in the video games industry has arisen against digital storefronts after Epic Games waged war against Apple and Google earlier this year. More recently, a class action lawsuit has been made against Valve and their digital storefront Steam alleging anti-competitive practices and federal antitrust violations surrounding their most favored …<\/a><\/p>\n","protected":false},"author":4,"featured_media":9414,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[51],"tags":[159,220,590,592,519],"_links":{"self":[{"href":"https:\/\/journals.law.unc.edu\/ncjolt\/wp-json\/wp\/v2\/posts\/9412"}],"collection":[{"href":"https:\/\/journals.law.unc.edu\/ncjolt\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/journals.law.unc.edu\/ncjolt\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/journals.law.unc.edu\/ncjolt\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/journals.law.unc.edu\/ncjolt\/wp-json\/wp\/v2\/comments?post=9412"}],"version-history":[{"count":1,"href":"https:\/\/journals.law.unc.edu\/ncjolt\/wp-json\/wp\/v2\/posts\/9412\/revisions"}],"predecessor-version":[{"id":9415,"href":"https:\/\/journals.law.unc.edu\/ncjolt\/wp-json\/wp\/v2\/posts\/9412\/revisions\/9415"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/journals.law.unc.edu\/ncjolt\/wp-json\/wp\/v2\/media\/9414"}],"wp:attachment":[{"href":"https:\/\/journals.law.unc.edu\/ncjolt\/wp-json\/wp\/v2\/media?parent=9412"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/journals.law.unc.edu\/ncjolt\/wp-json\/wp\/v2\/categories?post=9412"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/journals.law.unc.edu\/ncjolt\/wp-json\/wp\/v2\/tags?post=9412"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}