Here’s Precisely Why Valve Lost To The ACCC In Federal Court

As reported earlier this week, the Federal Court ruled that Valve was guilty of breaching Australian Consumer Law.

The major issue: the Australian Competition and Consumer Commission (ACCC) claimed Valve was misleading Australian consumers by stating they were not entitled to refund when, according to Australian Consumer Law, they were.

We’ve now been given access to the full reasons for the judgement against Valve. We now know precisely why they lost the case.

Valve’s defence against the ACCC’s claims hinged upon two claims:

First, Valve argued it technically didn’t conduct business in Australia, therefore Australian Consumer Law did not apply to Valve and the games it sold through the Steam client.

Secondly, Valve argued the games being sold through the Steam client didn’t fit underneath the definition of ‘goods’ as per Australian Consumer Law.

The Federal Court did not agree with those claims.

With regards to the issue of Valve doing business in Australia Justice Edelman, who made the final judgement, wrote:

[E]ven without specifically being told that the consumer was in Australia, the downloading of Steam Client in Australia and the agreement to Steam’s terms and conditions established a direct relationship between Valve and the Australian customer. This is in a context in which Valve had established game servers in Australia, it had content delivery networks in Australia, and it knew it had approximately 2.2 million subscribers in Australia. It intended to make representations to each Australian consumer who downloaded Steam Client.

Edelmen went onto explain that the fact Valve:

— Knowingly served 2.2 million Australians with Steam Accounts

— Spent $1.2 million establishing property and servers in Australia

— Had thousands of dollars worth of monthly expenses maintaining those servers in Australia

— Entered into third party agreements with multiple businesses in Australia

According to Edelman, this proved that Valve was indeed doing business in Australia.

The claim that games on Steam didn’t fit the definition of ‘goods’ was also found to be inaccurate.

Valve supplied consumers with a good. The definition of “goods” was extended when the Australian Consumer Law was enacted on 1 January 2011 to include “computer software”. This extension avoided debate about whether executable bits of digital data might fit with the idea of thinghood which would otherwise be an essential requirement for a “good”. Prior to this extension, cases had recognised that computer software that was supplied on a physical medium such as a CD-Rom was a good but, perhaps controversially, that digitally downloaded computer software was not.

Interestingly, the fact that many Steam games can run in ‘offline mode’ helped convince Justice Edelman that the games Valve provides customers were indeed ‘goods’ in the more traditional sense. “[T]he significance of the “offline” mode,” explained Edelman, “is that it shows that the consumer has been provided with software which can be used without any further communication with Valve’s servers.”

Essentially, Valve lost the case. They were found guilty of misleading consumers on the issue of refunds. But there were small victories. The ACCC were initially drawn to the Steam case after receiving complaints from four Australians who were refused refunds by Valve. All four believed their rights under Australian Consumer Law were being compromised. Interestingly, despite agreeing that Valve were guilty of misleading Australian consumers as a whole with its “no refunds” policy, Justice Edelman did not agree that Valve was under legal obligation to provide any of the four objectors with refunds.

“In each case,” wrote Edelman, “it was not a representation that a remedy would never be given when there had been any use of the goods. It was, instead, a representation that the amount of use in those cases prevented a refund.”

Simply put: they had spent too much time with the games to demand any refund in absolute terms.

But despite this — in broader, less specific terms — Valve lost the case. According to Edelman, “Valve’s challenges to the applicability of the Australian Consumer Law fails”.

According to all definitions, what seems like common sense to most of us was proven by the letter of the law: Valve conducts business in Australia, it continues to conduct business in Australia, and the video games it sells to Australians are — under Australian Consumer Law — goods.

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