Letting off Steam in online games over denied refunds

04 April 2017

We reported last year on a victory for Australian consumers when the ACCC successfully prosecuted US-based Valve Corporation (Valve) over its digital games distribution platform, Steam.

The original decision

In that case, the ACCC took issue with representations about Australian consumers’ rights to refunds. Valve argued its games were not subject to the Australian Consumer Law and the consumer guarantees implied by Australian law did not apply because it did not carry on business in Australia and its agreement with consumers was subject to the laws of Washington State.

The Federal Court of Australia rejected Valve’ s defences, finding that the Australian Consumer Law did apply to its dealings with Australian consumers. The trial judge, Justice Edelman, who has since been elevated to the High Court, found that:

  • Several representations made in three different versions of the Steam Subscriber Agreement, such as ‘ALL STEAM FEES ARE PAYABLE IN ADVANCE AND ARE NOT REFUNDABLE IN WHOLE OR IN PART…’, were false and misleading;
  • A representation made in two versions of the Steam Refund Policy, stating that ‘we do not offer refunds for purchases made through Steam‘, was also misleading, but not false; and
  • Various representations made in online chats between Australian consumers and Valve’s technical support team were not false or misleading.

In a subsequent hearing, Valve was ordered to pay $3 million in pecuniary penalties.

Valve has appealed the decision. The ACCC is cross-appealing on the issue of the representations in the online chats.

What’s the issue?

The ACCC had referred to instances of three different Australian consumers complaining about games acquired through Steam that were effectively unplayable due to significant technical issues. Valve’s support team routinely refused refund requests, citing the Steam Refund Policy, and directing consumers towards technical support instead. Each consumer repeatedly pursued their complaint and was continually knocked back. In two cases, Valve eventually applied credits to the consumers’ Steam accounts towards future games purchases after complaints had been made to the US Federal Trade Commission (in one case referring to it as ‘a one time exception to our policy‘). The third consumer complained to the ACCC but did not receive any further response from Valve.

In ruling that the representations made by Valve’s support team were not false or misleading, Justice Edelman noted:

  • It was important to consider the chat conversations as a whole, rather than individual comments in isolation, particularly as some of the comments contradicted each other;
  • The consumers themselves referred to their consumer rights, variously mentioning the Australian Consumer Law and threatening to complain to the ACCC, and did not accept Valve’s refusal to offer a refund;
  • The consumer guarantees under the Australian Consumer Law only provide the right to a refund in certain circumstances, so the chats need to be viewed in the context of whether the consumer would have been entitled to a refund in the particular case at hand; and
  • Valve was entitled to have a system to determine whether a specific issue amounted to a ‘major failure’ before agreeing to provide a refund.

His Honour found that Valve had not made a definitive representation that a consumer would never be entitled to a refund in any circumstances, and that the particular consumers in this case were not likely to be misled once the above factors were taken into account.

What does this mean?

Unless the Full Court reverses the Federal Court’s earlier decision, the key developments will remain untouched – Australians will still enjoy the protection of the consumer guarantees when dealing with foreign companies online, regardless of the jurisdiction nominated in the terms and conditions.

The ACCC’s cross-appeal will test how the courts will assess direct interactions between consumers and companies in relation to representations about their consumer rights. This could have a far greater impact for how Australian businesses deal with their customers as well as foreign businesses operating online.

The appeal is waiting to be scheduled and will most likely be heard later this year.

This article was written by Matthew Craven, Partner and Scott La Rocca, Senior Associate.

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