Judgment (CPO Application)

Judgment of the Tribunal in relation to an application by Vicki Shotbolt Class Representative Limited (“PCR”) for a collective proceedings order (“CPO”), pursuant to section 47B of the Competition Act 1998 (the “Act”).

The proposed collective proceedings seek to combine stand-alone claims for loss and damage caused by Valve’s alleged infringements of Article 102 of the Treaty on the Functioning of the European Union (up to 31 December 2020) and section 18 of the Act. The claims are pursued on behalf of up to 14 million UK-based consumers who purchased video games designed to be played on personal computers (“Games”) and/or additional content (including subscriptions) for such Games (“Add-on Content”) (collectively, the “Products”), during the Relevant Period (as defined in the Collective Proceedings Claim Form) whether on the Steam platform or on other platforms. The aggregate damages are provisionally estimated at up to £656 million.

The PCR alleges that Valve has abused this dominant position by:

1. Imposing Platform Parity Obligations (“PPOs”), that prohibit publishers from selling Products through other distribution channels on better terms than the same Products are available on Steam. The PCR alleges that the PPOs are likely to cause, and have in fact caused, restrictions of competition.
2. Imposing anti-steering provisions to the effect that, if a publisher wants consumers playing its Games distributed on Steam to be able to make in-game purchases, all such purchases must be made using the Steam application programming interface, and therefore Valve’s payment processing service. As a result, the payments are subject to Valve’s commission charges. Such anti-steering provisions leverage Valve’s dominant position in the Game Markets so as to enable it to secure a larger share of the Add-on Content Markets, by preventing or restricting the ability of other distribution channels to supply (including self-supply) Add-on Content for Games distributed on Steam.
3. Imposing excessive commission charges which amount to an unfair price which is then passed on to consumers.

In relation to the Authorisation Condition, in its response to the CPO application, Valve raised concerns in relation to the PCR’s funding arrangements. Following action taken by the PCR in relation to these concerns, Valve did not pursue these points further to contest the fulfilment of the Authorisation Condition.

The Tribunal concluded that the Authorisation Condition was satisfied and it was just and reasonable for the PCR to act as class representative in the proceedings.

In relation to the Eligibility Condition, Valve opposed the CPO application on the following grounds:

1. The PCR had not put forward an adequate methodology for determining Valve’s effective commission charge, or as Valve referred to it the effective revenue share, as the PCR had failed to consider the effects of Steam Keys (the “Effective Commission Charge Issue”).
2. The PCR had not put forward an adequate empirical method for determining the effect of the alleged PPOs (the “PPO Issue”) which related to a wider abuse allegation.
3. The PCR’s proposed class definition was inadequate as there was no workable methodology whereby proposed class members, including a high proportion of minors, can identify themselves as being class members (the “Class Certainty Issue”).

The Tribunal accepted that the effect of Steam Keys is a slightly unusual feature in calculating Valve’s effective commission charge and could result in uncertainty in the price alleged to be unfair. However, the Tribunal considered that the effect of Steam Keys on the effective commission charge would be limited and the PCR would be able to make a sufficient estimate using data from a range of sources. At trial, Valve would benefit from any reasonable doubt arising from any uncertainty caused by Steam Keys. The Tribunal therefore considered that the Pro-Sys Test had been satisfied and that the collective proceedings can be effectively tried as regards this issue. Insofar as the Steam Keys issue impacts on the calculation of damages, if the claim is successful, the Tribunal considered that there is no reason why the “broad axe principle” should not be available to assist in what will clearly, in any event, be an aggregated damages assessment.

In relation to the PPO Issue, the Tribunal also considered the Pro-Sys Test to be satisfied as the PCR had identified the legal approach that it would take to establishing an abuse, the elements of the arguments that it intends to develop, and the sources of evidence for those arguments (which one would reasonably expect to be available). The PCR’s approach would not simply rely on nebulous economic theory, as claimed by Valve, but rather on a mixture of evidence to support and evaluate a harm that competition law conventionally considers to occur. The PCR’s expert, Mr Harman, had undertaken a preliminary analysis which, if substantiated at trial, would be precisely the kind of detailed and specific evidence that would support the claim.

In relation to the Class Certainty Issue, following concerns raised by the Tribunal in relation to the class potentially including parties who had not suffered loss, the PCR proposed revisions to the proposed class definition which substantially diminished the concerns raised by Valve.  The revised proposed class definition tied the class tightly to the party who has suffered the loss, reducing the potential concern of the record keeping of minors. In light of that development, the Tribunal rejected Valve’s challenge in this respect.

The Tribunal was satisfied that the Eligibility Condition was satisfied, including in relation to matters raised by the Tribunal during the CPO hearing which were subsequently addressed by the PCR.

The Tribunal therefore concluded that the certification criteria were satisfied and it was appropriate to grant a CPO on an opt-out basis.