Valve Corporation v ACCC [2017] FCAFC 224: Misleading and Deceptive Conduct in Online Purchases of Games

Thursday 18 January 2018 @ 11.25 a.m. | Legal Research | Trade & Commerce

On 22 December 2017, the Full Court of the Federal Court handed down judgement in the matter of Valve Corporation v ACCC [2017] FCAFC 224. The decision concerned misleading and deceptive statements by Valve Corporation in relation to refunds for unplayable computer games.

Facts

Valve (‘the appellant’) is a company based in Washington in the US, which operates an online game distribution service known as ‘Steam’. As part of this service, the appellant controls an online video game delivery platform (‘the Steam client’) and an online support assistance service called ‘Steam Support’.

The Australian Competition and Consumer Commission (ACCC) (‘the respondent’) alleged that the appellant had contravened section 18 of Schedule 2 of the Competition and  Consumer Act 2010 (the 'Australian Consumer Law') by engaging in misleading or deceptive conduct, and section 29(1) of the Australian Consumer Law by making false or misleading representations concerning the existence, exclusion or effect of a condition, warranty, guarantee, right or remedy. These contraventions were alleged to have been made in the context of subscriber agreements and conversations through Steam Support.

Procedural History

The respondent instituted proceedings against the appellant in August 2014. The respondent's case alleged that the appellant was breaching the Australian Consumer Law because they had stated that they do not give refunds to consumers under any circumstances. These statements were made in online support conversations and in Steam Subscriber Agreements ('SSAs'). For more information on these proceedings, read TimeBase’s previous article.

In March 2016, the Federal Court found that terms and conditions contained within the SSAs and policies were false or misleading regarding consumer rights. For more information, please read TimeBase’s earlier article. Following this, a penalty of $3 million was imposed on the appellant for non-compliance with the Australian Consumer Law. Other orders made were declarations and orders for an injunction, the publication of a corrective notice and the implementation of a compliance programme at the company, which has been outlined in a previous article by TimeBase. However, it was found that some of the statements made in the context of conversations with Steam Support were not misleading.

The appellant appealed the whole of the judgement to the Full Court of the Federal Court. The respondent then filed a cross-appeal in relation to the findings about some of the statements not being misleading to individual consumers, which is the subject of this article.

Decision of the Full Federal Court

In their judgment, the Full Court, consisting of Justices Dowsett, McKerracher and Moshinsky, found that there was a direct relationship between the appellant and its consumers in Australia. Additionally, consumers had to agree to the SSA before they could open an account and purchase anything. In this context, the Court found that upon reading the SSAs and other documents, Valve had engaged in misleading or deceptive conduct. This is because it was apparent that a reasonable consumer would have read the policy as a statement to the effect that Valve was not required to provide a refund.

Regarding the cross appeal by the respondent, the Court found that the primary judge had not erred in making the judgment that certain statements were not misleading in the context of conversations with Steam Support. This was concluded by treating the representation in the conversations as one representation in the context of one conversation, rather than separate representations within conversations.  The Court stated:

‘In our view, no error is shown in the primary judge’s approach, namely to treat the online chats as a single (ongoing) conversation for the purposes of determining whether each of the four pleaded representations was made. We consider this to be consistent with authority, including Butcher. Although the online chats continued over a period of days or weeks, it was appropriate in the circumstances to have regard to the whole of the conversation as this formed the context in which to assess particular statements that were made by the Steam Support staff.’ [208]

The Court found that the penalty of $3 million was not manifestly excessive, citing the culture of non-compliance within Valve, and the fact that Valve did not seek advice about its position in Australia following the consumer complaints. The Court stated:

'It was open to the primary judge to find (at [25] of the Relief Reasons) that Valve’s conduct had a substantial effect on consumers, and to have regard to this in exercising the penalty discretion. This finding is unsurprising given the large number of subscriber accounts in Australia, the significance of the SSAs in the process of establishing an account and purchasing a computer game, and the relevance of the Steam Refund Policy if a customer was experiencing problems and considering seeking a refund. It was also open to the primary judge to find (at [37] of the Relief Reasons) that the misrepresentations were a significant part of Valve’s business process in making profits.’ [222]

The Court ordered that the appeal and cross-appeal both be dismissed with costs.

Reponse to the Decision

The ACCC said the decision would be an important precedent for compliance by overseas companies when operating within the Australian jurisdiction. In a media release ACCC Chairman, Rod Sims, said:

"This case sets an important precedent that overseas-based companies that sell to Australians must abide by our law. All goods come with automatic consumer guarantees that they are of acceptable quality and fit for the purpose for which they were sold, even if the business is based overseas."

TimeBase is an independent, privately owned Australian legal publisher specialising in the online delivery of accurate, comprehensive and innovative legislation research tools including LawOne and unique Point-in-Time Products. Nothing on this website should be construed as legal advice and does not substitute for the advice of competent legal counsel.

Sources:

Valve Corporation v Australian Competition and Consumer Commission [2017] FCAFC 224, available on TimeBase's LawOne service.

Media Release: Full Federal Court confirms that Valve misled gamers (22 December 2017). ACCC.

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