Differential Pricing Lands Steam Based Game Distributors In Hot Water
The European Union or the EU promotes the concept of “parallel trade” and as such hates differential pricing especially for customers of a particular product from different geographic locations in Europe or countries that are members of EU. Basically, if you sell a tomato online for €1 in Germany, you can’t then sell it for €2 in Spain.
Differential pricing in the gaming industry though has existed for a long time now. For those unaware of its negatives, it restricts gamers in a particular country from gaining access along with rest of the world by simply putting an impossible price tag during release. Basically, those who wanted to play, would pay exorbitant prices just because they belong to one particular geographic region.
Another flipside to this is that gamers from countries where prices of games are higher, can then use proxies and VPNs to pay and download games at much lower rates thus bypassing the price restrictions set by the companies. In China for example, retailers may have to use a program to unblock the Great Firewall of China in order to get through the restriction(s) that the government inherently place on their citizens.
Steam is not a game maker and it is owned by Valve. Game developers use this platform for the Steam community and outreach it has. It is a budding market place and using Steam to sell their products helps garner instant sales, communicate with fans and make improvements or updates to their games. However, this does not hold Steam liable for the pricing policies of individual game makers. The EU investigation has targeted in particular five companies that are suspected of practicing differential pricing within EU.
According to the latest statement from EU Anti-trust authorities, they are concerned that certain game publishers are bypassing EU single market regulations and charging their customers variable prices based solely on the country their IP address points to. Since, the games are essentially the same regardless of the geographic difference, such variable pricing strategy is in breach of EU regulations.
European Commission has already begun investigations into the five accused companies and its sole jurisdiction is on sales through the Steam network. The companies under scrutiny include Focus Home, Capcom, Bandai Namco, ZeniMax and Koch Media. The accusation is that they are putting geographic restrictions on Steam activation keys so if a buyer purchases a game in a certain part of EU then he cannot play that in other parts of EU. Basically, the buyer must purchase another license to play the same game if he moves across specific borders.
The reason why European Commission is bothered with this practice is because it provides companies a chance to sell their activation keys at higher prices in specific countries and undercutting the customers in other countries.
It is this practice that the EU believes is breaching parallel trade rules. The question remains as to whether the issue is with pricing or because multiple licenses are required within EU. If it is the case of pricing then parallel trade comes into effect but if it is due to multiple licenses, then the EU might find the companies in breech non-liable though they may write them off with a warning not to engage in such arm twisting practices.
Another question on the minds of investigators is whether the companies are unfairly restricting retail prices or simply singling out customers because of their location or nationality.
There are several games under scrutiny on the Steam network. Project Cars, Dark Souls, Pack-man 256 are the titles selected from Bandai Namco for the investigation while Capcom features with Devil May Cry and Resident Evil series. Then there are titles from the other three brands, popular among them being Railroad X, Cities XXL, Elder Scrolls Online.
The intriguing thing about this whole episode is that there were no complaints on differential pricing. The Commission has clarified that this investigation is their own undertaking and it was started only after observing the company activities on Steam.
Simultaneously, two other similar investigations were opened but pertaining to different spheres of operation all together. Online hotel bookings, sale of domestic appliances and hi-fi equipment are the other three areas where the commission will investigate several sellers and companies.
In the recent past, the Commission had aired similar concerns with regards to hotel bookings. Tour operators such as REWE, TUI, Thomas Cook and Kuoni are all part of the online hotel booking investigations for operating with hoteliers like the Melia Hotels to show differential prices and room availabilities to customers based on their country of residence or their nationality.
This investigation is also backed by the Computer & Communications Industry Association as they hope the results of the investigation will help prevent sale of products with scrupulous intents online. Such practices undermine consumer choice and price transparency.
Couple of years back Origin practiced differential pricing for most of its titles especially with the Indian subcontinent. Games such as FIFA were priced much lower as opposed to rest of the world in an attempt to garner greater sales in the subcontinent except it resulted in exploitation. Consumers from other parts of the world would use Indian IP addresses to purchase installation codes and download games at fraction of the cost for the rest of the world. Soon after, Origin removed such pricing practices and went with a unified single price strategy.