Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—D.N.J.: New Jersey consumer fraud claims proceed against GameStop over alleged failure to disclose lack of downloadable content with used video games, (Aug 9, 2013)

By Tobias J. Gillett, J.D., LL.M.

Purchasers of used video games from GameStop Corp. have stated claims that GameStop violated the New Jersey Consumer Fraud Act (CFA) by selling used video games without disclosing that they did not come with the downloadable content (DLC) that would come with new video games, the federal district court in Camden, New Jersey, has ruled (Farley v. GameStop Corp., August 7, 2013, Kugler, R.). The purchasers alleged that the cost of buying the used video games and the DLC separately was higher than the cost of new video games, despite GameStop’s claims that purchasers would save money by buying the used games.

The purchasers bought pre-owned video games from GameStop, but allegedly later discovered that the video games did not come with the DLC that would come with a new video game. The purchasers claimed that DLC is an integral feature of video games, and that they actually paid more for the used video games than they would have for new ones by having to buy the DLC separately. They alleged that this result contradicted statements from GameStop like those claiming that “our used game trade program creates value for customers,” and that the plaintiffs “saved [dollar amount] buying Used!”

The purchasers filed suit against GameStop, alleging claims for violation of the CFA and for unjust enrichment. GameStop filed a motion to dismiss.

Standing. The court found the purchasers had standing to bring their claims. Although GameStop contended that the purchasers may have bought video games without DLC to save money, that argument went to the merits of the purchasers’ claims, not to their standing to sue. Moreover, one of the plaintiffs had standing to sue even though he did not purchase DLC after buying the used video games, because “[a] plaintiff need not spend money to correct defendant’s errors to demonstrate a benefit-of-the-bargain loss under the CFA.”

Pleading with particularity. The plaintiffs also pled their claims with sufficient particularity to satisfy Federal Rule of Civil Procedure 9(b)’s heightened pleading standard for fraud claims. The purchasers did not have to allege a specific date, place, or time to satisfy Rule 9(b). The allegations of two purchasers that they bought pre-owned video games from GameStop between May 1, 2010 and November 10, 2010, and bought DLC for those games at a later date, were sufficient “to notify Defendants of the alleged misconduct forming the basis of Plaintiffs’ complaint.”

New Jersey Consumer Fraud Act

The court explained that a plaintiff asserting a claim under the CFA must allege: “(1) unlawful conduct by the defendants; (2) an ascertainable loss on the part of the plaintiff; and (3) a causal relationship between the defendants’ unlawful conduct and the plaintiff’s ascertainable loss.”

Unlawful conduct. The purchasers adequately pled that GameStop committed unlawful conduct by making knowing omissions, according to the court. The plaintiffs alleged that GameStop knew that DLC was not included with the used video games, but did not reveal that fact to the purchasers. In addition, they alleged that GameStop induced them to purchase the video games through statements indicating that they would save money buying the used games, even though GameStop “knew that a large percentage of pre-owned video game purchasers would want DLC.” The court could only consider allegations in the complaint at the motion-to-dismiss stage, and therefore could not consider GameStop’s argument that it informed the purchasers of the lack of DLC through language on the game boxes and in store signage.

However, the purchasers failed to plead that GameStop made an affirmative misrepresentation, in the court’s view. The statement that the purchasers “saved [dollar amount] buying Used!” was not an affirmative misrepresentation “because Plaintiffs did pay less for pre-owned video games than new video games.” They did not allege that GameStop had told them that the video games would contain DLC when they did not.

Ascertainable loss. The court also found that the purchasers sufficiently alleged an ascertainable “benefit-of-the-bargain” loss because they alleged that they purchased pre-owned video games from GameStop expecting to also receive DLC, and that the cost for the used games and DLC was actually higher than the price for a new game that came with DLC. It was “inconsequential” that the plaintiffs did not allege that they purchased the DLC from GameStop, because “a plaintiff need not spend money to correct defendant’s errors” to establish an ascertainable loss under the CFA.

Causal relationship. The purchasers “clearly establish[ed]” a causal nexus between GameStop’s alleged unlawful conduct and their ascertainable loss, according to the court. The purchasers alleged that they purchased video games from the plaintiffs with the belief that DLC was included, and as a result “received less than they expected.”

The case is Civil Action No. 12-4734 (RBK/JS).

Attorneys: Joseph A. Osefchen (DeNittis Osefchen, P.C.) for John Farley. Jeffrey J. Greenbaum (Sills Cummis & Gross P.C.) for GameStop Corp.

Companies: GameStop Corp.

Cases: StateUnfairTradePractices NewJerseyNews