Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Sony PlayStation Store settles digital game pricing lawsuit for $7.85 million, (Dec 17, 2024)

By George Basharis, J.D.

Class action alleged anti-competitive practices after Sony ended retail game voucher sales in 2019.

A proposed $7.85 million settlement has been reached in a class action lawsuit alleging Sony Interactive Entertainment (SIE) engaged in anticompetitive practices by eliminating the sale of digital PlayStation game vouchers at retail stores. The proposed settlement agreement, filed in the U.S. District Court for the Northern District of California, comes after three years of litigation and extensive discovery revealing that while the practice affected fewer games than initially thought, some consumers paid higher prices after Sony’s policy change in April 2019. If the court grants the motion for preliminary approval, it would resolve claims that Sony unlawfully monopolized the digital PlayStation game market by terminating its game-specific voucher program at major retailers like Amazon, GameStop, and Walmart (Caccuri v. Sony Interactive Entertainment LLC, No. 3:21-cv-03361-AMO (N.D. Cal. Dec. 13, 2024)).

The lawsuit claimed that Sony’s April 2019 decision to stop selling game-specific vouchers (GSVs) at retailers like Amazon, Best Buy, GameStop, Target, and Walmart resulted in supracompetitive prices for digital PlayStation games. While general PlayStation Network (PSN) gift cards remained available at these retailers, customers could no longer purchase codes for specific games. The complaint alleged this was an anticompetitive move that unlawfully terminated a profitable course of dealing with retailers, arguing that Sony’s only rational purpose for ending the program was to exclude competition in the digital PlayStation game market.

Settlement details. According to the motion for preliminary approval filed on December 13, 2024, the proposed settlement would provide PSN account credits to approximately 4.4 million users who purchased certain digital games through the PlayStation Store between April 1, 2019, and December 31, 2023. The settlement fund is non-reversionary, meaning unclaimed funds will not return to Sony, and eligible class members with active PSN accounts will receive their credits automatically without needing to file claims. For those with deactivated accounts, the settlement provides options to receive compensation by contacting administrators through a dedicated phone number, email, or mailing address to verify their qualifying purchases.

Distribution and eligibility. Under the proposed settlement, eligible class members with active PSN accounts will automatically receive account credits without needing to submit claim forms. The settlement administrator, A.B. Data Ltd., will work with Sony to distribute the funds directly to users’ accounts. Class members with deactivated accounts can contact the settlement administrators to provide documentation of their qualifying purchases and receive compensation.

To qualify for the settlement, users must have purchased digital games through the PlayStation Store that met specific criteria: the games must have had GSVs available at retail before April 2019, with at least 200 GSV redemptions prior to that date, and shown a price increase of at least fifty cents compared to pre-April 2019 prices. Sony’s preliminary analysis identified approximately 103 games that meet these qualification requirements, a significantly smaller number than initially contemplated when the lawsuit was filed.

Path to settlement. The case went through extensive litigation before reaching this proposed settlement. Sony faced two motions to dismiss and a motion to deny class certification. The court proceedings included substantial document discovery, with over 100,000 documents produced by Sony and approximately 6,500 documents from third-party retailers. The settlement was reached with the assistance of mediator Christopher Hockett, a former Chair of the ABA Antitrust Section and lecturer at Berkeley Law, who was initially appointed by the court to conduct an Early Neutral Evaluation.

Before reaching the proposed settlement, Sony faced a significant legal setback in May 2024 when it failed to prevent class certification. The company had attempted to deny class certification based on arbitration agreements and class action waivers in its various PlayStation user agreements. However, the court ruled that Sony had waived its arbitration rights by actively engaging in litigation instead of enforcing those rights earlier in the case.

The court found that Sony’s decision to file two motions to dismiss, engage in discovery, and continue active litigation rather than promptly move to compel arbitration demonstrated an intentional waiver of its arbitration rights. This ruling cleared a major hurdle for the plaintiffs in pursuing their class action claims, as Sony could not use either arbitration provisions or class action waivers from its user agreements to prevent class certification.

Reduced scope and damages. During discovery, the plaintiffs found that the scope of affected games and potential damages was smaller than initially anticipated. Court documents reveal that retailers were often charging Sony's suggested retail prices or higher prices than the PlayStation Store, limiting the number of games where consumers may have been harmed by the policy change.

“The data produced in the litigation indicates that certain consumers may have been injured concerning a small number of digital games sold prior to and after April 2019,” the motion states. The plaintiffs’ economic expert indicated that proving economic injury and resulting damages would have been “very challenging.”

The plaintiffs’ attorneys intend to seek up to one-third of the settlement amount for fees and expenses, along with service awards not exceeding $10,000 each for the three named plaintiffs. Sony maintains the right to challenge these requested amounts.

While Sony denies any wrongdoing, the company agreed to the settlement to avoid further litigation costs and distractions, according to court documents. The settlement agreement includes no provision for injunctive relief, meaning Sony’s current digital sales practices will remain unchanged.

A preliminary approval hearing is scheduled for January 23, 2025. If preliminarily approved, notice will be sent to class members via email to their PSN-associated addresses. Additional notice will be published in PC Gamer magazine and digital advertisements on gaming websites. The settlement will not become final until after a fairness hearing and final court approval. The earliest possible distribution date for the settlement credits would be April 1, 2025.

The Case is No. 3:21-cv-03361-AMO.

Judge: Olguín, A.

Attorneys: Alex R. Straus (Milberg Coleman Bryson Phillips Grossman, PLLC) for Agustin Caccuri. John F. Cove, Jr. (Allen Overy Shearman Sterling US LLP) for Sony Interactive Entertainment LLC.

Companies: Sony Interactive Entertainment LLC

News: Antitrust WisconsinNews