Play by the rules: online sales and the Australian Consumer Law

In Valve Corporation v Australian Competition and Consumer Commission¹ (Valve v ACCC), the Full Federal Court unanimously shot down Valve Corporation’s (Valve) attempts to avoid its obligations to Australian video gamers under Schedule 2 of the Competition and Consumer Act² (commonly known as the Australian Consumer Law) on the basis that video game sales on its popular online platform, Steam, were not subject to Australian law.

Valve operates Steam, an international online storefront with a digital library of over 4,000 video games (including popular titles “PlayerUnknown’s Battlegrounds”, “DOTA 2”, “Subnautica”, “Civilization V” and “Grand Theft Auto V”) for sale to consumers.  Steam dominates the market for online video game sales.  It also provides a platform for users to review and play single and multi-player games, access forums, curate playlists of game and share game-related content.

In signing up to access the platform, users agreed to Steam’s Sale Agreement (SSA) that provided they:

• had no entitlement under any circumstances to a refund for games bought on Steam; and
• were excluded from the Australian Consumer Law’s guarantee and warranty that games sold on Steam were of acceptable quality.

Valve’s refund policy (which was accessible on Steam) further sought to exclude users from a refund for games bought on Steam.

These policies attracted controversy.  Steam’s “Greenlight” program allowed amateur and/or independent game developers to directly sell users “early access” to games purportedly still under development.  Many early access games were never completed, or completed with glitches and defects that rendered them unplayable.  Users also alleged developers and publishers misrepresented the quality, content and system requirement of games for sale on Steam.  Nonetheless, Valve refused to refund users for games that didn’t work – contending that users had agreed to Valve’s refund policy and the SSA.

As a result of complaints from three Australian Steam users concerning Valve’s SSA and refund policy, the Australian Consumer and Competition Commission (ACCC) brought proceedings against Valve in the Federal Court for breaches of the Australian Consumer Law.

Valve argued before Dowsett, Mckerracher and Moshinsky JJ of the Full Court that it was incorporated and based in the State of Washington within the United States of America.  Steam’s online infrastructure was largely operated on servers located outside Australia, and its services and goods were available internationally to customers across the world.  Valve received payment in the US and in US dollars, had no registered office in Australia, and did not have any employees in Australia.

The ACCC contested that Valve had over two million customers in Australia.  These customers formed a significant portion of Valve’s core market, and Valve lauded its dominant share of the Australian video game market to Steam customers and video game publishers and developers.  Further, Valve maintained multiple expensive servers in Australia to supply content to Australian consumers.

The Full Court unanimously found in the ACCC’s favour, holding that Valve carried on business in Australia.  The Court was particularly persuaded by the ACCC’s argument that Valve’s large consumer base in Australia and dominant position in the Australian video game market demonstrated it carried on business Australia, and should consequently be subject to Australian Consumer Law.  The Court was also influenced by the significant server infrastructure Valve maintained in Australia directly and through third parties to supply Australian consumers with digital content.

Lavan comment

Valve v ACCC is a timely reminder that overseas companies seeking online access to Australian markets must play by the rules.  Online transactions to Australia-based consumers can result in the imposition of Australian law.  Accordingly, overseas retailers that supply Australians with goods and services should familiarise themselves with obligations imposed by the Australian Consumer Law – as these may be more complex and onerous than international equivalents.  Despite the ongoing globalisation facilitated by the internet and digital commerce, the laws of local jurisdictions should always be considered in the provision of online goods and services.