4 April, 2017
Australian Competition and Consumer Commission v Valve Corporation (No 7) [2016] FCA 1553 (23 December 2016)
What you need to know
The Federal Court has imposed a $3 million penalty on American-based entertainment and gaming giant Valve Corporation (Valve) for contraventions of the Australian Consumer Law (ACL) in relation to its “Steam” gaming distribution platform. The Court also granted an injunction and ordered Valve to publish consumer rights-related information on its website for 12 months and to implement an internal consumer compliance program.
The contraventions related to false or misleading representations to consumers in its terms and conditions (particularly relating to consumer guarantees under the ACL, and the consumers’ entitlement to a refund). The Court ordered such a significant penalty for a number of reasons, including Valve’s “very poor” culture of compliance.
What you need to do
These proceedings are a reminder that the ACCC is willing to institute proceedings against overseas corporations which engage in conduct that affects Australian consumers (even if that corporation does not have a physical presence in Australia).
Businesses should ensure that their policies and procedures (both internal and customer-facing terms and conditions) are compliant with Australian consumer law in relation to dealings with Australian consumers. Although many international businesses prefer to have one set of terms and conditions which apply world-wide, this case demonstrates that jurisdiction-specific clauses may be necessary.
Background
Valve, one of the world’s largest online game retailers, operates the Steam game distribution platform. Steam has approximately 125 million users worldwide, which includes approximately 2.2 million users in Australia. In related proceedings in March 2016, the Court found the terms and conditions in Steam’s subscriber agreements and refund policies falsely represented consumers’ guarantees and were misleading, in breach of the ACL. For example, the Court said that Valve represented in its terms and conditions that consumers had no entitlement in any circumstances to a refund from Valve for video games which the consumer had purchased.
These current proceedings were to determine the relief in relation to those prior proceedings. In determining the appropriate penalty, the Court had regard to (among other things) Valve’s culture of non-compliance and failure to admit any culpability.
Valve’s culture of noncompliance
The Court found that Valve’s culture of compliance “was, and is, very poor” and that some of the evidence given by its general counsel was “disturbing”. This included that:
- prior to (and during) the period of contravention, Valve did not obtain Australian legal advice – its general counsel said that he had not turned his mind to whether the ACL might apply because of the “way we think about our legal position in the world”; and
- Valve’s support staff (who handled refund enquiries from Australian consumers) were only given oral guidance from its general counsel in relation to compliance – Valve did not have any training manuals or other documents.
The Court noted that Valve had a history of reactive, rather than proactive, compliance – it would only comply with local laws if a court or regulator had sought or required it.
No admission of culpability
The Court said that Valve remained resolute that it was not liable for its contraventions and that subsequent amendments to its offending policies were not done out of an admission of responsibility. It further noted that in the prior proceedings, it was not clear whether Valve’s general counsel even accepted the outcome of those proceedings.
The fact that there were few mitigating factors in Valve’s favour meant that more stringent penalties were ultimately ordered by the Court.
Outcome
The Court ordered Valve to pay a $3 million penalty (as both a substantive penalty and for deterrence purposes) and to:
- be restrained for 3 years from representing to Australian consumers that it is not under an obligation to offer refunds for video game subscriptions or does not regard itself as being subject to the ACL;
- publish information on its website (accessible from a prominent link on its home page) for 12 months in relation to Australian consumer rights, including that Valve’s video games come with a non-excludable guarantee that they are of acceptable quality and consumers are entitled to a replacement or refund if that guarantee is not met; and
- implement a consumer compliance program for its staff.
Implications
This case highlights the willingness and ability of the ACCC to institute proceedings against overseas corporations which do not comply with the ACL. This is a particularly timely reminder for those businesses with an online-only presence in Australia to obtain Australian legal advice to ensure that their policies and procedures (including customer-facing terms and conditions) are compliant with Australian consumer law in relation to their dealings with Australian consumers.
For further information, please contact:
Amanda Ludlow, Partner, Ashurst
amanda.ludlow@ashurst.com
