Computer games are a commodity available everywhere. It's a market that allows producers to reach anyone with a working computer, gaming console, or mobile phone. However, the issue of accessibility raises the issue of geoblocking, which has occurred frequently in recent years. In today's post, we'll explore this topic through the lens of relevant legal regulations.
Geo-blocking involves limiting the ability to purchase products and services based on a potential buyer's citizenship or place of residence. The issue of geo-blocking is regulated in the European Union by Regulation 2018/302, referred to as the "Geo-Blocking Regulation" (hereinafter referred to as the Geo-Blocking Regulation). The key provisions of the Geo-Blocking Regulation include:
- Prohibition of differentiating the terms of sale of goods and services;
- Prohibition of differentiating payment terms based on place of residence or citizenship (for example: changing the price depending on the citizenship of a given entity);
- It is prohibited to block or limit a client's access to your web interface (automatic redirection to the version of the website in the domain of a given country, when we wanted to access the domain of another country).
After reading the above prohibitions, a red flag should go up for anyone who has ever purchased a game, for example, on Steam. Simply compare game prices in countries where games are sold through Steam to see that prices vary significantly depending on the market where they are sold.
So where does this differentiation come from, since such practices are expressly prohibited?
We should look at Article 4(1)(b) of the Geo-Blocking Regulation, which states that the prohibition on differentiating the terms of sale of services does not apply if the most important feature of those services is providing access to copyrighted works, as well as enabling their use and sale in intangible form (i.e., in the case of games, those that are not in boxed form – the most common type found on store shelves). Therefore, one conclusion should be drawn from the above article: differentiating the terms of sale is permitted when selling games on media other than physical media (CDs/DVDs). As for the other two prohibitions, they remain in force; that is, there are no exclusions regarding interfaces or payments.
In the area of game geoblocking, the case of the largest computer gaming platform, Steam, has received considerable attention. In early 2021, the European Commission imposed fines totaling €7.8 million on Steam (Valve) and its publishers: Bandai Namco, Capcom, Focus Home Interactive, Koch Media, and ZeniMax. What was the reason for the European Commission's decisive action?
- Valve provided publishers with activation keys for games whose activation was blocked in some countries, which is a clear violation of EU regulations by concluding prohibited anti-competitive agreements;
- Four out of five game publishers mentioned above concluded licensing agreements that contained clauses restricting passive sales, i.e. sales where the producer does not take the initiative to sell, but the consumer expresses the desire to buy.
As can be seen in the above example, intensified actions have been initiated to eliminate this type of infringements, not only on the basis of the Geo-Blocking Regulation, but also on the basis of normative acts relating to the branch of competition law.
To summarize, game geoblocking has become a problem that has come under increasing scrutiny in recent years. Moreover, as I mentioned above, the case of Steam and the five game publishers demonstrates that not only the Geoblocking Regulation but also competition law provide a basis for restricting undesirable geoblocking practices. Importantly, the European Commission emphasizes that any individual or company harmed by geoblocking practices can seek compensation in court; such information bodes well for the future (in the event of a similar situation) and serves as a deterrent to potential new infringers.
The European Commission's communication on geo-blocking (the case of Steam and five publishers) is available on the European Commission's website at the link.
This alert is for informational purposes only and does not constitute legal advice.
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