Valve CEO to testify in Steam antitrust lawsuit filed by Wolfire Games

(April 28, 2021)

Valve Games suppresses innovation in the gaming market and is harming both gamers and game developers with its anticompetitive practices, a new class action lawsuit claims.

The nationwide class action was filed in Washington on April 27 by lead Plaintiffs Wolfire Games, William Herbert, and Daniel Escobar. The group alleges that Valve violates federal and state antitrust and unfair competition laws in its domination of the PC gaming market, and is seeking public injunctive relief and damages.

According to the claim, Valve, which was founded in 1996 by former Microsoft employees as a video game development company, has illegally monopolized the market and distorted and restrained competition through its Steam Store and Steam Gaming Platform.

“Game publishers are forced to use the Steam Store and give Valve 30% of nearly every sale if they want to gain access to the Steam Gaming Platform—access they need in order to sell,” the claim states, adding that the Steam Gaming Platform is the most popular platform on the market with the most users.

In order to afford Valve’s 30 percent commission, game publishers have to raise prices and can no longer afford to invest in innovation and creation, according to the class action lawsuit.

“Gamers are injured by paying higher retail prices caused by Valve’s high commissions. Competition, output, and innovation are suppressed, in ways that can never be fully redressed by damages alone.”

Wolfire Games, a video game publisher in San Francisco, entered into Steam Distribution Agreements with Valve so that its games could be compatible with the popular Steam Gaming Platform, the claim states. In order to have a game on the Steam platform, publishers must agree to sell games through the Steam Store.

“As a result of Defendant’s anticompetitive practices, Wolfire Games has paid supracompetitive commissions to Valve.”

Florida resident William Herbert and New York local Daniel Escobar are both PC gamers who have bought games through the Steam Store, and say in the class action lawsuit that they have also paid “supracompetitive prices for PC Desktop Games.”

According to the claim, the PC video game market generates $30 billion a year worldwide, and 75 percent of those sales go through Steam Store.

“Valve uses that dominance to take an extraordinarily high cut from nearly every sale that passes through its store—30%. This 30% commission yields Valve over $6 billion dollars in annual revenue. For everyone else, it yields higher prices and less innovation,” the class action lawsuit states.

Despite a number of other game stores trying to crack the market with lower fees, including Electronic Arts (“EA”), Microsoft, Amazon, and Epic, Valve’s “abuse of market power” — whereby games must be listed on its platform to reach the majority of gamers — has led each to fail, the class action lawsuit claims.

“Due to its large market share and immense user base, game publishers generally consider the Steam Gaming Platform a must-have,” the claim says.

The class action lawsuit says that Valve also inflates market prices with its pricing restraints and forces gamers to overpay with its Steam Key Price Parity Provision and the Price Veto Provision.

Wolfire Games, Herbert, and Escobar want to represent anyone who has bought or sold a PC game on the Steam Store nationwide. They are suing for violations of the Sherman Act and Washington State Consumer Protection Act and seeking injunctive relief, damages, attorney’s fees, costs, interest, and a jury trial.

A number of online retailers and service providers have faced legal action over anticompetitive behavior. In January, Amazon was hit with a class action lawsuit for allegedly using anticompetitive agreements that set a price floor and restricted price competition for retail e-commerce, causing consumers in Canada to pay inflated prices.

Do you use the Steam Gaming Platform to play video games on your PC? Let us know in the comments section!

Wolfire Games, Herbert, and Escobar are represented by David D. Golden, A. Owen Glist, Ankur Kapoor, and Jeffrey I. Shinder of Constantine Cannon LLP, and Alicia Cobb, Steig D. Olson, David D. LeRay, Shane Seppinni, Adam B. Wolfson, and Charles B. Stevens of Quinn Emanuel Urquhart & Sullivan, LLP.

The Valve Games Antitrust Class Action Lawsuit is Wolfire Games, LLC, et al. v. Valve Corporation, Case No. 2:21-cv-00563, in the U.S. District Court Western District of Washington.