On 27 September 2023, the General Court touched upon the complex issue of Article 101 TFEU applicability in the context of by object restrictions of competition law and copyright protection (Case T-172/21). On this occasion, the General Court recalled that copyright is not intended to guarantee the highest possible remuneration to rightsholders nor to engage in conduct leading to artificial price differences between the partitioned national markets. In this context, the General Court confirmed the Commission’s decision finding that the restriction of cross-border sales of video games through the implementation of a geo-blocking key system constitutes a restriction by object contrary to Article 101 TFEU.
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The factual background
Valve Corporation (“Valve”) is the operator of Steam, an online gaming platform for PC video games. PC video games compatible with this platform (“Steam video games”) are developed by game publishers who hold the copyright to their respective games. In order to make their video games available on Steam, publishers enter into a distribution agreement with Valve which licenses the Steam technology to those publishers (“Steamworks services”). Subsequently, the publishers then upload their games to Steam’s servers and grant Valve a worldwide non-exclusive distribution license.
Online access to video games can be purchased by users either directly from the Steam platform, or from third-party distributors. In the latter case, in order to access and play online in the Steam environment, the user must activate the game on the platform by means of an activation key (“Steam keys”). In addition to the Steam keys, Steamworks services include a territory control function – geographical blocking – so that the video game can only be activated or/and played within the authorised territory (“geo-blocking Steam keys system”).
According to the European Commission (“Commission”), this geo-blocking Steam keys system was put in place in order to prevent passive sales of Steam video games within the territory of the EEA where those video games were distributed at a lower price. By decisions of 20 January 2021, the Commission found that Valve and five PC video games’ publishers had infringed article 101 TFEU by participating in a complex group of anti-competitive agreements or concerted practices which were intended to restrict cross-border sales of certain Steam video games and hence had as object the restriction of parallel imports.
Valve brought an action before the General Court in order to have the infringement decision annulled.
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The “agreement” and “concerted practice” qualification
Firstly, Valve argued that the conduct in question did not fall within the scope of Article 101 TFEU since it acted unilaterally as a mere service provider supplying publishers with the technical means for geo-blocking.
The General Court rejected Valve’s plea on the grounds that the latter was active on the relevant market insofar as it operated the Steam platform and that it sold the video games at issue on the Steam Store. Moreover, the General Court found that Valve was at least in potential competition with the Steam video games sold by third-party distributors on the Steam platform. Therefore, according to the General Court, the applicant played a “central role” in the relationship between publishers and gamers, as it was fully part of the economic chain.
Valve further argued that the Commission had broadened the notion of "agreement" and "concerted practice" by considering that there was a concurrence of wills, and thus collusion, with each of the five publishers.
In this regard, the General Court observed that the conduct in question was not unilateral. Indeed, there was a concurrence of wills between these actors to restrict passive sales, insofar as the applicant had, amongst others, chosen to implement the territorial control functionalities and promoted the use of it without distancing itself from this practice. Therefore, Valve could not ignore that geo-blocking Steam keys system was aimed to restrict parallel imports.
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The interweaving of competition law and copyright law
Secondly, Valve claimed that the Commission wrongly qualified the practice as a restriction by object notably because it did not take sufficient account of the novelty of the case and did not correctly assess the legal context of the conduct.
Concerning the novelty of the case, the General Court observed that the fact that the case-law relating to restrictions on parallel imports was developed in the context of relations between distributors and suppliers does not call into question the relevance of that case-law for finding that the conduct at issue was restrictive by object. Since the conduct in itself had as its object to prevent parallel imports and to restrict competition between the various distributors of the publishers, the fact that Valve and the publishers were not in a distributor/supplier relationship was irrelevant. The General Court therefore confirms the Commission’s finding that there was sufficiently solid and reliable experience to consider that, in principle, the agreements or concerted practices at issue were by their very nature harmful to the proper functioning of competition.
As regards the legal context, the General Court stated that it is well-established case law that the mere fact that an agreement involves intellectual property rights does not preclude the application of Article 101 TFEU. Indeed, while the Treaty does not affect the existence of intellectual property rights, in particular copyright, the exercise of such rights may nevertheless fall within the scope of the prohibitions provided in the Treaty, and especially by Article 101 TFEU. This may occur whenever such exercise appears to be the object, the means or the consequence of an agreement – which was the case at stake.
Moreover, the question of whether an intellectual property right has not been exhausted does not in itself preclude the application of Article 101 TFEU, nor does it preclude the conduct in question from constituting a restriction by object. This is the case where the exercise of that right can constitute a “disguised restriction on trade between Member States”.
In the case at hand, geo-blocking Steam keys system did not pursue the objective of protecting the publishers’ IP rights but was used to suppress parallel imports of video games and protect the high level of royalties received by publishers or the margins received by Valve. Such partitioning of the national markets and the resulting artificial price differences are irreconcilable with the completion of the internal market.
Consequently, the General Court found that the Commission did not err in considering that the publishers' copyright in the video games in question did not preclude the application of Article 101 TFEU to the analysed conduct or its classification as a restriction by object.
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Final remarks
The Valve case illustrates the fragile equilibrium between intellectual property protection and compliance with competition law rules in a very detailed judgment which highlights the conditions to be met for a conduct to be qualified as a by object restriction.
For further information about this case and/or for general legal advice relating to European competition law and copyright, please contact Pierre de Bandt or Marion Nuytten.