Geo-blocking of activation keys for video games represents an infringement of EU competition law

In 2017, the EU Commission initiated an investigation into Valve Corp., an American gaming company and the owner of the popular video game platform called »Steam«. The probe was prompted by reports of geo-blocking practices employed by Valve on certain PC video games within the Steam platform, based on users' geographical locations. By decision of 20 January 2021, the EU Commission found that the operator of the platform, Valve, and five games publishers, namely Bandai, Capcom, Focus Home, Koch Media, and ZeniMax, infringed EU competition law.

The EU Commission found that Valve and five publishers had cooperated through restrictive agreements or concerted practices to restrict cross-border sales of certain Steam-compatible PC video games by setting up territorial control features that prevented users outside a specific EU Member State from activating the video games in question. The EU Commission thus found an infringement of Article 101 of the Treaty on the Functioning of the European Union, which prohibits agreements having as their object or effect the restriction of competition, and fined all the companies involved. The EU Commission charged the video game publishers with restricting competition by object. Such restrictions are those which, by their very nature, are capable of hindering competition and do not require further analysis of their economic impact in order to be unlawful.

Valve challenged the decision by filing a lawsuit before the General Court of the European Union (the »General Court«) seeking to have the decision annulled with regard to its involvement in prohibited practices. Valve's principal argument rested on the assertion that they, along with the other publishers involved, were simply exercising their copyright and were therefore justified in restricting the activation of video games. In its ruling, referred to as judgment No. T-172/21, issued on 27 September 2023, the General Court dismissed Valve's action.

In its decision, the General Court upheld the EU Commission's decision that there was an agreement or concerted practice between Valve and each of the five publishers. Users can buy video games on the Steam platform directly from the Steam Store or from third-party sellers. When purchasing from a third party, users must use a unique code or activation key to activate the game on Steam.

The geo-blocking of activation keys by Valve Corp. and other game publishers was designed to prevent video games sold at lower prices in certain countries from being purchased by distributors or users in countries where prices are significantly higher. The General Court therefore concluded that those geo-blocking measures were not intended to protect the copyright of publishers of computer video games, as claimed by the companies involved. Instead, their main purpose was to prevent the parallel importation of those video games and to protect the high royalties collected by the publishers and the profits made by Valve.

In connection with its decision, the General Court also established a significant principle regarding the relationship between EU competition law and copyright law. Specifically, it emphasized that copyright is primarily intended to protect the rights of content holders, ensuring their ability to commercially exploit and make available their protected intellectual property through licensing arrangements in exchange for remuneration. Copyright, however, does not guarantee right holders the ability to demand the highest possible remuneration or engage in practices that result in artificial price disparities among partitioned national markets. Such market partitioning and the resulting artificial price differences are incompatible with the goals of a unified EU internal market.