A new lawsuit accused Valve of abusing Steam’s market power to avoid price competition.
The Hollywood Reporter said that five players filed an antitrust class action in California that claims Valve requires developers and publishers to enter a “most favored nation” clause.
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A most favored nation clause is a retail parity clause in which a supplier agrees to treat a particular customer in the same way as all other customers. MFNs are under increasing scrutiny by authorities around the world, including the European Commission.
The lawsuit claims that a developer or publisher must agree that the price of a PC game on Steam will be the same as on other PC platforms. Essentially, the lawsuit states that Steam does not allow developers to lower their game prices on other platforms.
The lawsuit, filed by American law firm Vorys, Sater, Seymour and Pease LLP, says Valve’s MFN clause keeps PC game prices on other platforms high, such as the Epic Games Store and Microsoft Store.
“Steam MFN also hinders innovation by creating an artificial barrier to entry for platforms,” says the complaint.
“When a market like this is highly concentrated, a new entrant can benefit consumers by lowering competitor’s prices. The ability to provide PC games to consumers at lower prices is a way for a company or a new competitor to gain market share. If this market were to function properly – that is, if Steam MFN did not exist and platforms were able to compete in price – platforms that compete with Steam would be able to provide the same (or higher) margins for game developers, while providing lower prices for consumers. “
The suit uses tweets from Epic chief Tim Sweeney to support his case. In a January 2019 tweet, Sweeney said that Steam “has veto power over prices”.
Steam has veto power over prices, so if a multi-store developer wants to sell his game for a lower price on the Epic Games store than Steam, then:
1) Can the valve simply say? No?
2) The price disparity would likely irritate Steam users, leading to bomb analysis, etc.– Tim Sweeney (@TimSweeneyEpic) January 30, 2019
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So, in February tweet, Sweeney added:
“If the dominant store has a price parity clause and gets a much higher revenue share than competitors, then the only way for creators to pass the savings on to players is to avoid the dominant store.
“Ultimately, this is what it is about!”
Interestingly, the lawsuit includes a number of publishers as co-defendants: CD Projekt, Ubisoft, kChamp Games (the independent developer behind ShellShock Live), Rust, LLC (the Los Angeles developer behind Hot Dogs, Horseshoes & Hand Grenades) and Devolver Digital. The lawsuit claims that these companies have agreed to Steam MFN.
But why include only those publishers and developers and not the many others who release games on Steam? Why highlight two independent developers in this case?
The lawsuit claims that if Steam MFN did not exist and platforms were able to compete on price, then platforms that compete with Steam would be able to provide the same (or higher) margins to game developers while simultaneously providing prices lower to consumers. But does it really work?
Ubisoft abandoned Steam some time ago to launch its PC games on the Epic Games Store. On the Epic platform, Assassin’s Creed Valhalla costs £ 49.99. It’s the same price as Assassin’s Creed Odyssey costs on Steam. Despite the increased revenue share offered to publishers and developers at the Epic Games Store and the fact that Assassin’s Creed Valhalla is not on Steam, it does not appear that any savings have been passed on to customers.
What about the Steam MVN on which the process is based? According to the Steamworks documentation pricing section, developers and publishers are responsible for setting and managing the prices of their products. However, the synopsis confirms that Valve will review the initial prices and the proposed price adjustments (sales).
“The initial prices, as well as the proposed price adjustments, will be analyzed by Valve and will usually be processed in one or two business days”, reads the documentation.
“We recommend pricing strategies based on our experience and we can suggest prices based on currency conversions and other factors.”
Is this equivalent to an MVN clause? Tim Sweeney seems to think so. February 2019 tweet, the head of Epic said that the line “analyzed by Valve” “shows that developers do not have the autonomy to set prices for games”.
There is a clearer stipulation in the Steam keys section of the Steamworks documentation that reveals that Valve expects price parity on Steam keys, specifically:
“Please note that Steam keys cannot be sold on other websites, unless the product is also available for purchase on Steam at a price not exceeding that offered on any other service or website.”
What’s going on here, then? In February 2019, Tim Sweeney of Epic tweeted suggesting private agreements between Steam and developers is generally not known.
“The situation with Steam price parity expectations is not transparent,” said Sweeney. “Valve’s public documents say temporary sales elsewhere are fine, but they expect general price parity on Steam keys. What each Steam private contract with developers requires is generally not known.”
So later on from Sweeney in Twitter:
“Several developers have told us that Valve has approval on the price and that long-term price parity (excluding temporary sales) is expected. We are doing more research. Since these contracts are private, any clarification from Valve would be helpful.”
Valve has not yet commented on the process. Devolver shrugged.
We started Rust Inc. to silently steal Rust from you.
– Devolver Digital (@devolverdigital) January 29, 2021
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The lawsuit wants a ruling that Steam’s alleged MFN clause “is anti-competitive and constitutes illegal monopolization and monopoly maintenance,” a preliminary injunction, damages and court costs.