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.


Comments

    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”.
    Thinghood is my new favourite word.

      Traditionally the legal term has been "reism" meaning 'thinginess'.

    Apologies to the original commenter who raised in the other articles, but Valve's argument they did not conduct business here falls apart when you realise you can buy Steam vouchers from retail stores.

      They're not actually steam vouchers though? Aren't they from a 3rd party that you then have to go to their website and get steam credit through them?

        They would be set up as a separate business, and not Steam specifically.

        To use Netflix as an example, when you sign on with Netflix, you're not signing with Netflix Australia, you sign with somewhere like Netflix Singapore, so your money goes to them, not Netflix Australia like you assume. Different debate there of course, but in general most of these things are compartmentalised like that to reduce various obligations.

        In the case of vouchers, you buy something from a different company and its THEM that have a deal with Steam. That company can be based anywhere, and deals with its own tax matters.

        The ones from EB, you give them ~25 bucks, they give you a Steam Voucher for $20 bucks. There's no way they'd be able to do that without permission from Valve.

          Hold on. You give them $25 and they give you a $20 Steam Voucher? How does that work. When I buy a $50 Steam Voucher in New Zealand I get $50 added to my Steam Wallet. Why would you be paying more for less? Is that really what EB does?

          You spend $AU25 to get $US20. With conversion rates, you're actually saving $AU1.10

        The ones that I've bought from Coles and EB Games work through steam wallet natively

        The ones EB Games sell you redeem straight on the Steam store, which adds the funds straight away to your Steam wallet. I can't speak for the ones Coles sell, but yeah.

          silly receipt code
          not even the plastic card

      Beat me to it.
      Not to mention the fact the steam client store page displays Aus ratings, and not esrb or pegi for us aussies.

      The vouchers might not necessarily be an issue. They are in USD, but more importantly they *might* be imported into the country by EB/JB/other suppliers. I don't have the knowledge of where the retailers source them from though...

        They aren't. Those cards you see are purely for display. All you get is a code on the receipt t redeem.

        The cards JB stock aren't in USD, they are in AUD and get converted when you redeem the code.

        EB Games sells them off their register so it spits out a code on a receipt for you. Just like they do for PSN & XBL credit.

      I'd be more inclined to say it falls apart because of regional pricing.

      That was me (I think)

      And although it's a third party vendor, they're trading on behalf of Valve within Australia. When you call the phone number on the card, you get greeted with "Welcome to Steam Support" not "Welcome to Incomm."

      And the financial side of the cards is done by Touch Crop, who are trading as an Australian company.

    Wondering about how this affects Oculus' store, given they're just starting things up now. Haven't actually checked through any of their user agreements or anything to see what they say about refunds or anything, but I guess they gotta now.

      I imagine since they're owned by Facebook, and Facebook has a physical presence in Australia, they definitely would count as 'doing business in Australia' so yeah, they probably do need a refund process. Interesting.

    In a broader sense, this effects a lot of other areas, including (potentially) the good old chestnut of diverting profits offshore. Specifically, that the process establishes a connection to Australia, which is one of the key tests with GST, and one of the loopholes businesses like Netflix have been using to call their actions imports.

      I didn't know Netflix claimed their services were imports. As far as I know, I'm being served by a local Netflix box in a datacenter somewhere nearby. That seems like doing business in Aus to me. Although I can't use it offline, but that was only one point in establishing the case.

        Its that 'as far as I know' part that catches people out. They are doing business here, but not with you.

        The tenner you pay goes to a foreign company, not an Aussie one, and that creates the loophole. People assume they are signing on with Netflix Australia, when they arent - Netflix Australia has a contract with Netflix Singapore (pretty sure its there anyway) to supply their services locally, but its not with you. So they get paid peanuts to host (just enough to cover operating costs usually), and hence only a small portion of the real money gets put through the Aussie tax system.

        At the centre of things, thats how the profit diversion stuff works mostly. Theres obviously more to it, but in a nutshell it works by having the money you pay go to an offshore company, and using the technicality of it being an import work in their favor.

    It's funny that:
    * Regional pricing just for Australia, for their own games and for others
    * Modified versions of games specifically to meet Australian censorship laws (of which the game was developed and published by Valve)
    * The fact that steam vouchers bought in brick and mortar are entered directly into the steam client for processing
    * The fact that games bought in brick and mortar often use steamworks, requiring valve to be involved to use the game
    * The fact that someone who is a US account holder can move to Australia and their account still works
    * The fact that Australian credit cards are supported for adding credit to Steam directly
    * The fact that email addresses that contain .au domain suffixes are accepted for creating accounts
    * The fact that that my valve account clearly allows me to list that my location is "Melbourne, Victoria, Australia" with 12 years of service.

    And they still argued they didn't do business here.
    ???

      Didn't the Valve handbook suggest you can move to different teams to try different things when you felt like it?

      Maybe the lunch lady was being the lawyer when they submitted the "I'm in Seattle, so clearly Valve don't do business in Australia" defense.

      What else were they going to do, rollover and accept they were wrong without contesting the case?

      Even if they admitted to themselves that they had no chance they still had to put up a legal defence and go with the best premise possible to win. They can't do an out of court settlement with the ACCC so they only really had the option of go to court or rollover and accept whatever the ACCC wanted to mete out.

        It also probably serves as a stronger impetus to 'do something' within the company.

        There's a big difference between arguing, "We should probably get around to doing this properly at some point, when we have some spare time and resources, I guess," and, "We need to comply with the law."

        Not 100% accurate tho. Ive witnessed first hand a company breaching ACCC code. It was unintentional and the company immediately moved to fix the fault. They spoke with the ACCC and said it would take roughly 6 months to implement changes. It was accepted and no charges were laid. Valve looked at it as a cost/risk issue and figured theyd have a chance to come out better off if they fought. If they had rolled over at the start and made the adjustment to have refunds it would have potentially cost them more to do so.

        It was a risk. and if the chance of passing was high enough then they roll the dice.

      You also need to install their software, which also contains their store onto your computer.

    Did nobody bring up the point that they charge Australians differently as evidence? It'd be nice if they either started charging AUD or gave us the U.S. price.

      We'll never get the US price, even Canada gets price gouged. We were all set to get AUD on Steam back before this started but they pulled the plug on it when the charges from the ACCC were made.

      I'm hoping that Valve won't appeal and that this settles relatively quickly so they can move on with their now compliant refund policy and give us AUD on Steam.

        we had AUD before, but it was changed to USD because it was cheaper for us, but then of course once we starterd moving to digital over physical, publishers started to realize that we were getting games cheaper than normal, so they started increasing the price just for us, and the first publisher to do that 2k, not EA, Not Activision, Not Ubisoft, but motherucking 2K. They Did it back in 2009 well before the Aussie Dollar hit Parity with the US Dollar and the first game was Borderlands which was increased from 49.99USD to 79.99USD 2 weeks AFTER it launched. 2K claim it was a pricing error that the game was up for 49.99USD since it went up for preorder until they upped it 2 weeks after launch.

        2k games are also the cuntwaffles that bullied GMG into charging us more for their games, and the fuckfaces then tried to bully GoG into doing the same

    Dealing Business in Australia - Yes, absolutely, they deserve to get a slap on the arse for that.

    Dealing in 'Goods' though? Are people really so incredibly effing stupid as to think that they own the games from Steam? It's a subscription service - it's plastered everywhere on their T&Cs, that's what you signed up for. You buy the right to download a game. One of these days (that's not true, it'll never happen), consumers (and the Courts) will start having to take responsibility for being allowed to exist and buy things without a fully-functioning brain.

      This is precisely what I want to see fought for - games as goods. 'Games a service and not a product' is a huge blow to consumer rights. We're already seeing it in games which should not ever have had their single-player components linked to always-online servers, being shut down and rendered useless. 'Caveat emptor, bitches!' is the worst excuse on earth for providing shitty service.
      There are standards. If you want to make money off something, you have to meet them.

      I'm really looking forward to seeing the court's ruling applied to things like First Sale Doctrine.

      Last edited 31/03/16 4:59 pm

      Um, the law clearly states that software is a Good in Australia. The Steam Subscriber Agreement contains the term:

      "7. DISCLAIMERS; LIMITATION OF LIABILITY; NO GUARANTEES; LIMITED WARRANTY

      Prior to acquiring a Subscription, you should consult the product information made available on Steam, including Subscription description, minimum technical requirements, and user reviews.

      THIS SECTION DOES NOT REDUCE YOUR MANDATORY CONSUMER RIGHTS UNDER THE LAWS OF YOUR LOCAL JURISDICTION."

      Ergo, games bought on Steam (constituting separate pieces of software from Steam itself regardless of the medium of delivery) are Goods.

      You still have no recourse if you are legitimately banned from Steam as the law only provides for refunds where you haven't misused a product or service in any way that caused the problem.

      Last edited 31/03/16 7:38 pm

      Dealing in 'Goods' though? Are people really so incredibly effing stupid as to think that they own the games from Steam? It's a subscription service - it's plastered everywhere on their T&Cs, that's what you signed up for. You buy the right to download a game. One of these days (that's not true, it'll never happen), consumers (and the Courts) will start having to take responsibility for being allowed to exist and buy things without a fully-functioning brain.

      Well, the courts have just declared them goods, and declared they fall under Australian consumer protection laws. One of the keystones of our consumer protection laws is that you can't just sign most of them away in a TOS. Just because Valve says that it's a subscription service in the TOS doesn't mean that's true. Just because you agreed to it doesn't make it legal. Whether or not you own the games you buy is now a lot more up in the air, and I'd wager the courts coming down on the side of you actually owning the copy of the game.

    A great day for gamers, a bad day for Ubisoft.

    So how long until Gerry Norman and co badger the government with the verdict, saying it "proves" GST needs to go on digital items?

      I thought that was already incoming as part of the 'netflix tax'.

    way too many disappointed people complaining about steam to the commision

    edit: and well within their right too

    Last edited 31/03/16 11:03 pm

    ugh, so this is going to increase the cost of games on Steam by how much? Brace yourselves for an Australia-Tax increase.

    They also have Australia specific prices (in USD), as far as AA - AAA titles go, there; no point in using steam anymore since they want to fuck us so bad.

    Does this mean that it's buyer beware in the USA? Do they not have consumer laws for refunds and stuff?

      They do but it is very corrupt with lobbying and bribed officials.

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