Antitrust Law Daily Wrap Up, ANTITRUST—W.D. Wash.: Class certified in digital PC game distribution antitrust litigation, (Dec 2, 2024)

By Kenneth H. Ryesky, M.B.A., J.D.

Former employee of alleged monopolist described online store "as a 'virtual printing press' that imposes a '30% tax on an entire industry.'"

A federal district court in Seattle has denied a digital PC game online store operator's Daubert objections to an expert's testimony in a class action in which Sherman Act violations were alleged. The operator's "critiques go to the weight of the evidence, rather than admissibility." The court also certified the class of digital PC game distributors who paid a commission to the digital games store operator. The court ruled that the class warranted certification because the plaintiffs met all of the requisites and the alleged monopolist's objections were insufficient to defeat certification. Class representatives and class counsel were also appointed; other putative classes in related cases are unaffected by the ruling (In re Valve Antitrust Litigation, No. 2:21-cv-00563-JNW (W.D. Wash. Nov. 26, 2024)).

Background. During the early 1960's, the larger business and governmental entities acquired and used mainframe computers for their own needs and purposes. From this, some entrepreneurial mainframe computer owners began to offer computing services to remote customers and subscribers through the existing telephone line infrastructures.

While sophisticated mainframe computer users had long developed recreational computer programs for their own personal pastime entertainment, the development and expansion of personal computers (PCs) opened up a popular demand for computer games and created a product market for PC games.

The Valve Corporation (Valve), which began as a video game developer that marketed its own PC games, gradually shifted its concentration into marketing video games to PC users, while leaving the development of new video games to other entrepreneurs. With the development and expansion of the Internet for commercial purposes, recreational gamers no longer needed to procure the game disks or other physical media, but could obtain the gaming software online. Valve created and continues to operate a PC gaming platform known as the Steam Gaming Platform, and sells its physical and online wares through an enterprise known as the Steam Store (collectively, Steam). Through its Steam enterprises, Valve has become the world's unquestioned largest desktop PC game distributor.

Valve's business model entails (1) availing gamers free use of its Steam Gaming Platform; and (2) allowing sellers of PC games to use the marketing services of its Steam Store, for which it charges the seller a commission as high as 30 percent.

Some PC desktop game purveyors and users have filed a putative class action lawsuit against Valve, alleging Sherman Act and Washington state law violations. Similar lawsuits against Valve have been brought by other parties in the same court; these are being handled as related cases in the litigation.

In addition to the commission payment scheme imposed by Valve upon the sellers who use the Steam Store, the lawsuit targets other practices by Valve as anticompetitive. One such practice is the Steam Keys Price Parity provision. The Price Parity provision allows sellers to sell a game through a channel other than the Steam Store, provided that the sales price is no less than the Steam Store price; else, Valve will not sell the game or support it through compatibility with its Gaming Platform. The plaintiffs assert that Valve enforces the Price Parity provision by various measures of pressure or coercion, including the delisting of the game from the Steam Store.

Another practice with which the plaintiffs take issue is the so-called "Price Veto Provision," by which Valve can veto sellers' prices charged for the games they sell. The plaintiffs assert that this provision is selectively enforced by Valve.

Earlier, the federal district court in Seattle advanced amended complaints brought by Wolfire Games, LLC, and Dark Catt Studios Holdings, Inc., plaintiffs who now moved for class certification and the appointment of class counsel, while Valve moved to exclude the testimony of Wolfire's expert.

Expert testimony. The court denied Valve's motion to exclude the testimony of Wolfire's expert. Valve had questioned the methodology used by the expert. The court found the methodology to comport with the Fed. R. Evid. 702 requisites. Valve is a privately-held corporation and is not required to make all of the disclosures a publicly-traded one must make; many court documents remain under seal to preserve the confidentiality of Valve's inside information, and particular percentages from the expert's report are sanitized from the court order itself. In light of the confidentiality requirements, the expert found it necessary to use proxy models and hypothetical markets to arrive at his conclusions. The expert made estimates and assumptions from valid data and sources, including disclosed communications within Valve.

Valve's disagreement with the expert's proffered testimony did not make the opinion unsound. Valve would have the opportunity at trial to present its own experts' views. Wolfire's expert's proposed testimony was "based on sufficient facts or data" [Fed. R. Evid. 702(b)].

Class certification. The court granted Wolfire's motion to certify the class of individuals or entities who directly or indirectly paid a commission to Valve for the sale or use of a game on the Steam Platform during the class period. Valve objected to Wolfire's market definition, and contended that the commonality and predominance prerequisites were not met [Fed. R. Civ. P. 23]. The court found that Wolfire did demonstrate a "cogent market" and did present evidence of Valve's Price Parity provision that was common to all class members. The court also found that the four-year antitrust statute of limitations did not defeat predominance because there was "common proof of Valve's overt acts occurring within the proposed class period" which made individual inquiry of each class member unnecessary. The court also named Wolfire and another entity as class representatives, and appointed their attorneys as class counsel.

The Case is No. 2:21-cv-00563-JNW.

Judge: Whitehead, J.

Attorneys: A. Owen Glist (Constantine Cannon LLP) for Wolfire Games LLC. Andrew C. Indorf (Holwell Shuster & Goldberg LLP) for Valve Corp.

Companies: Valve Corp.; Wolfire Games LLC

Cases: Antitrust WashingtonNews