Clifford Chance

In January 2021, the European Commission ("EC") fined Valve and five video game publishers EUR 7.8 million for geo-blocking practices.
Last week, the General Court upheld the EC's characterisation of geo-blocking practices restricting cross-border sales of certain PC games based on the geographical location of users in the EEA as being a "by object" restriction of competition violating Article 101(1) TFEU.

The facts
Valve is a game streaming services provider that operates an online PC gaming platform called Steam. On this platform, users can download or stream various PC video games developed by Valve and other video game publishers.

In January 2021, the EC fined Valve and five video game publishers for geo-blocking practices involving Steam activation keys. These were unique alphanumeric codes or sequences required for a user to access the game(s) on the Steam platform.

The result of these practices was that EEA users could not activate games on Steam that had been purchased from another Member State where those games were cheaper.

Concurrence of wills prerequisite for finding that an "agreement" or "concerted practice" exists
Valve took issue with the EC's characterisation of this conduct as evincing an "agreement" or "concerted practice" since – it argued – it acted merely as a service provider supplying nothing more than technical means of geo-blocking to publishers.

However, the General Court dismissed this argument. In doing so, it referred to case law discussing these concepts and confirmed that the existence of an "agreement" or a "concerted practice" is based on the expression of the concurrence of wills of two parties on the principle of a restriction of competition.

Although this is not "new" law, it is a helpful clarification in an area where there has been some debate in the legal community about the circumstances in which "apparently unilateral" conduct could form the basis of an agreement within the meaning of Article 101(1) TFEU.

The General Court clarified in para. 55 that "the Commission cannot … hold that apparently unilateral conduct in reality forms the basis of an agreement between undertakings within the meaning of Article 101(1) TFEU, if it does not establish the existence of an acquiescence, express or implied, in that conduct on the part of the other undertakings involved."

The judgment also contains some discussion about passive/tacit acquiescence and distancing oneself from certain conduct. However, the General Court notes that the EC's decision was not based solely on Valve's knowledge of the objective pursued by the publishers or on the mere fact that it did not distance itself from that conduct.

Geo-blocking practices as a "by object" restriction of competition
Valve argued that the EC made errors of law and fact in finding that these practices constituted "by object" restrictions.

Part of that argument hinged on the fact that the video games were protected by copyright and that the video game publishers were entitled to grant distributors such as Valve licences to distribute those games to certain EEA countries only.

However, the General Court concluded that no such errors were made, and that the EC had appropriately assessed the legal and economic context, including the interplay between IP and competition law.

The General Court held that "the question of whether or not the intellectual property right is exhausted does not in itself preclude the application of Article 101 TFEU or the conduct at issue from constituting a restriction by object where the exercise of that right is liable to constitute a disguised restriction on trade between Member States."

The General Court recognised that these IP-related questions –
i.e., whether publishers' copyright was subject to the rule of exhaustion, or whether the publishers could take legal action against distributors' passive sales – should be handled by national courts.

Ultimately, though, the General Court ruled that the conduct at issue was not about protecting publishers' copyrights but in fact related to "additional measures" intended to ensure compliance with territorial limitations and that because this conduct was aimed at dividing the EEA into national markets, limiting parallel imports and thus passive sales, it was correctly characterised as being a "by object" restriction of competition.

This judgment sees a continuation of the trend of competition law giving less deference to IP and contains welcome clarification (in line with a recent ECJ preliminary ruling in Case C-211/22) on the need to demonstrate a "concurrence of wills" to establish the existence of an "agreement" or "concerted practice" which could fall foul of Article 101(1) TFEU.