The court dismissed a class-action lawsuit alleging that Sony was abusing its monopoly position in the PlayStation digital game market. But the dismissal leaves room for an amended complaint with additional factual context to move forward with the same “viable” antitrust arguments.
The lawsuit, originally filed last May, built on Sony’s decision in 2019 to ban physical and online retailers from selling digital download codes for games on the PSN store (as Nintendo and Microsoft still do). The decision was “specifically designed to eliminate price competition from other digital video game retailers”, the lawsuit alleged, by forcing gamers to “pay a higher price for PlayStation digital games than in the free and unrestricted competitive retail market”.
But in a ruling filed last week (as noted by Bloomberg Law), Northern California District Judge Richard Seaborg wrote that the class-action plaintiffs did not provide “enough factual details” that Sony “voluntarily ended a lucrative practice” of removing retail downloads. codes.
This kind of evidence, showing that Sony made a bad business decision in the short term to secure long-term monopoly profits, is a necessary part of a Sherman Act antitrust suit. But while the lawsuit states that Sony takes an 11.5% commission on physical retail sales of games and 30% on digital sales on PSN, the plaintiffs “do not indicate whether the license fee also applies to download code sales.” [at retailers].”
“While it seems almost certain that Sony has made some revenue from download codes, and at this stage Plaintiffs do not need to prove that the practice was profitable, the plaintiffs should at least describe the process by which Sony made money from this practice, Judge Seaborg wrote. exercise.”
A “viable” monopoly argument?
This factual question aside, Judge Seaborg wrote elsewhere in the judgment that the general arguments regarding Sony’s exercise of monopoly power were “viable at this stage of the proceedings.”
While Sony controls only a small fraction of the overall market for downloadable console games (i.e. PlayStation console games), Judge Seaborg noted that “A PlayStation user looking to find a lower price for a digital game would have to look for games for a completely different console. which requires buying another console for hundreds of dollars.” This kind of platform “tie-in” could legally establish Sony as a kind of “one-brand” monopoly, which was clearly seen in the example Kodak vs Image Tech Services case.
Judge Seaborg also specifically noted that Sony’s position here differs from that of Valve, which has faced its own lawsuit over alleged anti-competitive control of the Steam gaming market. In this case, “the Steam platform was free to users, and only the games were worth the money,” Seaborg wrote, referring to “unlike PlayStation users, a Steam user could switch to a game on a different platform upon seeing the price difference between Steam Store and other online store for digital games.” While this argument ignores other non-monetary barriers to platform switching (such as Steam user friend lists, previously unlocked achievements, in-game items, etc.), switching PC gaming platforms is indeed usually cheaper than switching console platforms. If the Sony plaintiffs can provide concrete new evidence of how Sony made money from retail sales of download codes, they have 30 days to file an amended complaint. A successful amendment of this type also does not seem out of the question; while the lawsuit against Valve was initially dismissed last November, an amended version with “additional context” was deemed “sufficient to make a plausible claim of illegal behavior” in May.
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