ACCC v Valve Corporation (No 3) [2016] FCA 196: Valve Corporation Found Guilty of Misleading and Deceptive Conduct

Friday 1 April 2016 @ 9.47 a.m. | Legal Research | Trade & Commerce

In a judgment handed down during March 2016, the Federal Court has found that Valve Corporation (Valve), through its online game distribution platform Steam, and its Steam website:

“… engaged in misleading or deceptive conduct and made false or misleading representations to Australian consumers about the consumer guarantees …”

under the Australian Consumer Law (ACL) (the ACL is contained in Schedule 2 to the Competition and Consumer Act 2010 (Cth)).

These proceedings were brought by the Australian Competition and Consumer Commission (ACCC).

Company Background

Valve is an entertainment software and technology company founded in 1996 and located in the USA and predominately operates from Washington State. Valve owns and operates an online computer game distribution platform known as “Steam” that has over 125 million users worldwide, with approximately 2.2 million of those users being Australian consumers. In 2015, Valve’s revenue was reported at over $3 billion.

Valve sells digitally downloadable computer games through Steam to Australian consumers. It does not have physical retail stores in Australia.

Findings of the Court

The Court found that Valve made the following false or misleading representations to consumers, in the terms and conditions contained in three versions of its Steam Subscriber Agreement and two versions of its Steam Refund Policy:

  • Consumers were not entitled to a refund for digitally downloaded games purchased from Valve via the Steam website or Steam Client (in any circumstances);
  • Valve had excluded statutory guarantees and/or warranties that goods would be of acceptable quality; and
  • Valve had restricted or modified statutory guarantees and/or warranties of acceptable quality.

Valve said at [para 4]:

“…that its conduct did not occur in Australia and that it does not carry on business in Australia so the Australian Consumer Law did not apply to it …”

In his judgment, Justice Edelman concluded that making each of these representations involved conduct in Australia by Valve and that, in any event, Valve was carrying on business in Australia [see para 340].

Comment from the ACCC Chairman

Commenting on the Court’s decision in a recent ACCC Media Release, ACCC Chairman Rod Sims said:

“The Federal Court’s decision reinforces that foreign based businesses selling goods and/or services to Australian consumers can be subject to Australian Consumer Law obligations, including the consumer guarantees. In this case, Valve is a US company operating mainly outside Australia, but, in making representations to Australian consumers, the Federal Court has found that Valve engaged in conduct in Australia. It is also significant that the Court held that, in any case, based on the facts, Valve was carrying on business in Australia. This is also the first time Courts have applied the extended definition of ‘goods’ to include ‘computer software’ in the ACL. It will provide greater certainty where digital goods are supplied to consumers through online platforms. Consumer issues in the online marketplace are a priority for the ACCC and we will continue to take appropriate enforcement action to hold businesses accountable for breaches of the ACL."

Protection for Consumers under the ACL

Under the ACL, all consumer goods or services come with automatic consumer guarantees that they are of acceptable quality and fit for the purpose for which they were sold. If they are not, consumers have a right to a remedy, which may include refund, repair or replacement in certain circumstances. These consumer rights cannot be excluded, restricted or modified.

It has also been reported that Valve will be required to cover up to 75 percent of the ACCC's legal costs and that a hearing has been set for April 2016 to discuss potential relief.

TimeBase is an independent, privately owned Australian legal publisher specialising in the online delivery of accurate, comprehensive and innovative legislation research tools including LawOne and unique Point-in-Time Products.

Sources:

The ACCC finds Valve breached Australian Consumer Law
Federal Court finds Valve made misleading representations about consumer guarantees – ACCC Release MR 35/16

ACCC v Valve Corporation (No 3) [2016] FCA 196 (24 March 2016)

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