Valve ordered to pay $3 million penalty for breaches of Australian Consumer Law

Following its decision in March 2016, the Federal Court of Australia recently ordered Valve Corporation (Valve), a company based in the USA, to pay a penalty of $3 million for its breach of the Australian Consumer Law (ACL).

In March 2016, the Federal Court held that Valve had breached the ACL by making false or misleading representations to consumers in connection with its online gaming platform, called “Steam”. In particular, the Federal Court found that Valve’s “Steam Subscriber Agreement” and two of its refund policies relating to Steam contravened the ACL by:

• representing that consumers were not entitled to a refund for digitally downloaded games purchased from Valve via the Steam website or Steam Client;
• purporting to exclude statutory guarantees and / or warranties that goods would be of acceptable quality; and
• purporting to restrict or modify statutory guarantees and / or warranties of acceptable quality.

Importantly, the Federal Court found that the ACL applied to Valve’s online supply of goods and services to Australian consumers, even though Valve is (and was) based in the USA and the relevant contract identified the laws of Washington State as being the “governing law”. This finding confirmed that the ACL may apply to the supply of goods and / or services to Australian consumers by online traders based overseas.

When recently determining the appropriate penalty in response to Valve’s conduct, Justice Edelman described Valve’s culture of compliance as being very poor, pointing towards its lack of concern to obtain any legal advice about local laws and its incautious approach in forming the view that it was not subject to Australian law (despite having servers in Australia). Justice Edelman also noted Valve’s failure to provide evidence of any written compliance policy.

In addition to the $3 million penalty, the Federal Court ordered Valve to:

• publish a prescribed notice regarding Australian consumer rights on its website for 12 months;
• implement an ACL compliance program to be undertaken by each of its employees and all other persons who may deal with Australian consumers on Valve’s behalf; and
• not make the same or any similar false or misleading representations to Australian consumers for 3 years.

Considering the Federal Court’s findings and the hefty penalty imposed on Valve, it is especially important for all online traders based overseas to obtain advice about the application of the ACL before supplying goods or services to Australian consumers. Further, this case also serves as an important reminder for traders based in Australia to take active steps to ensure ACL compliance in order to avoid incurring similar penalties and significant reputational damage. For further information on how Macpherson Kelley can assist in this area, please contact Kelly Dickson.

The information contained in this article is general in nature and cannot be relied on as legal advice nor does it create an engagement. Please contact one of our lawyers listed above for advice about your specific situation.