Last week, video game developer and distributor Valve Corporation, was fined AUD$3million (approx USD$2.2million) by the Federal Court of Australia for breaching the Australian Consumer Law. In short, the Court found that by refusing to provide refunds to Australian customers who purchased games which didn’t operate as advertised, Valve had breached the law which operates to protect consumers in such circumstances.
Valve’s defence was threefold. First, there was a conflict of laws and as per the user agreement, the law of Washington State should apply. Secondly, there was no “supply of goods” as required by the Australian Consumer Law. Thirdly, that Valve’s conduct was not in Australia and Valve did not carry on business in Australia. Those arguments were rejected in a lengthy judgment of Justice Edelman and Valve has foreshadowed an appeal.
Whether or not Valve does appeal, some interesting things were revealed in the penalty phase of the proceedings where evidence was given by Karl Quackenbush, General Counsel for Valve. Mr Quackenbush testified that Valve did not obtain legal advice when it started selling games in Australia and did not consider its obligations until the Australian Competition and Consumer Commission began investigating. This behaviour was described as “disturbing” by Justice Edelman.
Valve may have thought little of the Australian proceedings but I would argue otherwise. In this day and age of international cooperation in law enforcement and enforcing judgments, I would think the fine would prove enforceable in some way, if not against Valve’s Australian cash flow. Moreover, the decision has received international attention and reflects poorly on Valve’s treatment of its userbase and has wider consequences. It has been reported that the French are pursuing similar action.
In an age where rapid growth is valued by investors, and startups are run on fumes, I accept that a young company may not have the time or financial resources to seek advice in all the jurisdictions in which it operates. I would have thought a more mature company like Valve would consider such advice necessary. But this does not mean such obligations should completely escape management’s consideration, and I would propose a simple and commercially viable way to completely deal with this risk. Offer good customer service.
The complaints which led to these proceedings are detailed in the Court record (see the judgment from paragraph 275). In one example, an Australian user sought a refund for the ‘X-Rebirth’ game, and gave Valve multiple opportunities to make good his concerns. Below is a sample of the messages exchanged between the user and Valve’s customer support in 2013:
User: This software does not work as advertised. The purchase of this software and any refund request is protected under Australian law via rules set down by the ACCC (http:/www.accc.gov.au). If I don’t receive a refund within 7 working days. I will put forward a complaint with the ACCC.
Valve: Hello
Thank you for contacting Steam Support.
Unfortunately, we cannot offer a refund for this transaction. …User: Thank-you for the response; however this is an unacceptable resolution. The reality is this product was released in a dysfunctional and incomplete state while being advertised as a complete final version. I am willing to accept either a) a full refund of the product or b) a steam store credit for the total cost of the product resulting in the removal of this product from my Steam library. Please escalate this issue.
I will in the meantime begin the initial proceedings of making a complaint with the ACCC.User: Hi
I still haven’t received a response since I asked for my X-Rebirth refund request to again be looked at. I have noticed that other persons have successfully been awarded a refund for this product. As I mentioned in the previous post I will be happy for a Steam store credit rather than a full refund in cash.
X-Rebirth is still unplayable even after several patches, and in some cases is actually worse. The release quality of X-Rebirth is unacceptable to be called a full final release and professional reviews backup this claim… Please consider my request as soon as possible. As an Australian consumer my request is fair under my local laws according to the ACCC.Valve: Hello
As with most software products, we do not offer refunds or exchanges for purchases made on our website or through the Steam Client. This includes, but is not limited to, games, Early Access Games, software, gifted or traded purchases, downloadable content, subscriptions, and in-game items/currency….
The complaints paint the picture of a clear and ongoing customer service failure. In fact, the users usually gave valve an explicit opportunity to avoid the matter escalating. If you are unable to establish a legal compliance program alongside your growth plan, then consider managing your risk through good customer service. A high standard of service will likely meet most consumer laws and win you more customers.