Legal Opinion: How will Valve’s ban on class-action lawsuits affect you?
By Patrick Vuleta on August 2, 2012 at 1:51 pm
Americanism strikes again. Yesterday, Valve updated their Steam user agreement. If you’re a Steam user, you’re now prohibited from suing Valve in a class action. The good news, however, is that Valve will pay the costs of you and them having a private, gentlemanly tiff. That is, if you accept their choice of judge: the American Arbitration Association, with offices in every American mall.
Now, if Steam locks me out of seeing Kelly in Mass Effect 2, I may well be pissed enough to fly all the way to America. However, if something goes wrong for the rest of you, you’re out of luck. Valve won’t be paying the costs for you to sue them. And they’ll probably still try to argue that you can’t bring a class action lawsuit, either.
So… what will happen if you find cause to sue Valve? Let’s talk it through, starting with America: the land where everything begins.
These agreements ARE enforceable
“I can’t sign my rights away!” says a random commentator on every EULA piece I’ve ever written. Well actually, you can – in America. The issue was decided by the United States Supreme Court in the landmark AT&T Mobility v. Concepcion case of 2011.
AT&T sold a phone to Vincent and Liza Concepcion, advertised as free but coming with a hidden $30 sales tax. $30! You could buy ten bags of pretzels for that.
One thing led to another, and soon a horde of pretzel-less, angry customers were descending on the courts in a class action. Anyway, the sales contract had a term prohibiting a class action, much like Valve’s new thing.
To cut a long and probably boring story short, the Supreme Court found the term enforceable, and the class action failed. Crap. No more pretzels.
The case is important because previously, such terms were generally limited to employment contracts. But now they can be in all kinds of contracts, including the contract you have with Valve for using Steam. And the American courts will enforce them, requiring you (if you’re American) to pursue the arbitration, not a class action.
The only times when American courts haven’t enforced class action waivers is when the terms were unfair, such as requiring the customer to always pay the costs of arbitration. This is why Valve offer to pay all arbitration costs: they don’t want their contract thrown out of court.
But will Australian courts enforce the agreement?
“I can’t sign my rights away in Australia, though!” you might say. Well… Australian law says both yes and no.
First, several state and federal laws say that Australians are entitled to bring class actions. That would be the strongest argument for saying the new Steam agreement does not apply to you.
However, we also have the International Arbitration Act, which directly contradicts this. It says that courts are required to refer cases to arbitration where a valid arbitration agreement exists. Several recent Australian court decisions do favour arbitration strongly, so, my guess, if push came to shove, the International Arbitration Act would win out.
If that happened, the main limit on Valve’s agreement would be the Australian Consumer Law, which says contracts can’t include unfair terms. Obviously, having to fly to America to resolve your dispute with Valve would be unfair.
The most likely outcome would be a court finding the American-centric terms are unenforceable, leaving us with the bolded “YOU AND VALVE AGREE TO RESOLVE ALL DISPUTES AND CLAIMS BETWEEN US IN INDIVIDUAL BINDING ARBITRATION.” That is the sum and substance of the new Steam agreement for Australian gamers. Nothing unfair with that, so you’d still have to sit down to arbitration.
Valve is jumping on a bandwagon, and we should be concerned
Valve justified its new agreement with a statement that, among other things, claimed that lawyers are money-grabbing bastards. It then went on to say that prohibiting class actions is cheaper for the whole community.
My problem with this is that class actions have a real, justified place in our legal system. Doctors now report child abuse after the landmark case of Landeros v Flood. The case wasn’t brought for profit; it was to stop doctors wimping out of their responsibilities.
Class actions are also justified when a company has done substantial wrong, but the victims have no money to bring individual lawsuits. The best example would be a superannuation company shafting retirees out of their life savings. In such a case, black and white arbitration is not suitable, and neither is individual legal action.
On this note, Valve’s ‘it’s for the greater good’ statements read like PR spin. Valve did not craft their agreement with the gaming community in mind: they’re jumping on the bandwagon of American companies in every industry having these agreements. And by doing this, they increase the strength of such agreements across a wide range of industries—medical, insurance, superannuation, and everything else besides. The more companies that use these agreements, the stronger they become.
Class actions can be a waste of money, but the problems usually lie at other stages of the process, such as insufficient gatekeeping to prevent frivolous claims from gaining legs. It’s these problems that need addressing, not denying class actions as a whole. At this rate, we may end in a situation where companies get to do whatever they want and no one can stop them.
Disclaimer: Anything written here is online opinion. As always, you should seek your own individual advice if you wish to pursue any personal matter.
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Legal Opinion: Does the class-action lawsuit over Aliens: Colonial Marines have a chance?
Our gaming lawyer examines the case.
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But the SSA does not say anything about class action arbitration does it?
So I don’t see how how a class action could get referred to that.
And what about the part that says you can not, not agree to the new SSA.
Would that also fall under “unfair terms” part.
How about the issue that if you DONT agree to the terms they are with-holding your property from you [Your games that you bought with real money]
You may not have a box with the game printed on the front but they are not letting you access your own products unless you agree to sign away your rights.
That has got to be a violation?
Also before I get a reply back saying that you agreed to the service and that they can withhold your property
You BOUGHT the games BEFORE the agreement came in. Now the new agreement is in and your not signing off on it they retroactively take away your access.
The arbitration component could be argued as being separate to the class action component. Even if the part on arbitration is held to be valid, the class action component would not necessarily be upheld. Partial rescission of contracts has been entertained under Australian law. Also contracts which oust the jurisdiction of the Court have not being very successful in Australia.
There is also a possible argument as to duress/unconscionable conduct with the new contract, as we are effectively forced to agree to it.
In summary I think it would definitely be an arguable case. It would however need a court case to be run before a definitive answer could be obtained.
As a final year law student I find their statement about greedy lawyers offensive and made without any kind of evidence to back it up.
You are a final year law student and not a lawyer with a job. Just because you get the piece of paper does not mean that you will get the job; it definitely does not mean you will get the job on your terms (unless you are amazing) :P.
What can I say: I have a lot of law-grad friends…
pinothyj,
Rather harsh don’t you think? My reference to being a law student was regarding taking offence at the cheap shot on lawyers – to justify taking away consumer rights.
Why the dig?
doesn’t matter. when you “purchased the games” you weren’t actually buying property, you were buying a license. that has always been there and is extremely common in software. I believe windows has the same setup.
the interesting thing will be to see what happens if/when someone tries to sue regarding this point. I read someone talking about this and they noticed a lot of misleading language in the steam store. terms like “buy this game”, or “you own this game”. for now, the contract you signed when you game valve money says you don’t own the game, you own a license. and they can take that license away any damn time they please.
it’s such a powerful clause, but the question is, is it fair?
The way I look at it is Steam is a service. You’re effectively starting anew with using that service every time you log in. The agreement refers to this daily use, in my mind.
IIRC, when you buy software, you don’t OWN it in the traditional sense of possessions, you have purchased a licence.
That is what the SSA is, you accept that to have the ability to purchase licences for games.
I do agree with you that it is not fair if you do not accept the terms, you aren’t allowed to play the games you have purchased.
Its the whole spin that really pees me off.
Just be honest, say you’re covering your own ass if something big hits the fan.
Its the constant erosion of consumer rights in the guise of “this is good for both of us”. Yeah right, maybe in some cases, definitely not in other cases.
Its so good in fact, we’re not giving a choice…
Valve furthur eases their own concerns and responsibilities in relation to your data and most people don’t seem to care.
But, when you pay for the game you are ostensibly paying for a lifetime license of the product, they should have to give you the option of a full refund every time they change the ‘service’ agreement. I imagine however that buried in the EULA is a clause allowing them to change the EULA at any time to say anything they want it to…
I struggle to understand how these are enforceable. If I had not accepted the recent T’s and C’s change this morning, I would be unable to access my existing library of games which is valued in the thousands… I have effectively been blackmailed.
I’d actually be pretty interested to see what happens when a case goes to arbitration. AFAIK, this hasn’t been tested yet. It’s all posturing until it does get tested, but I do think the no class actions terms would hold. Also not sure what would give cause to hundreds/thousands of gamers to want to launch a class action. But hey, the most unlikely disputes can give rise to them.
once again this comes down to steam’s clause about you not actually owning anything, just paying for a license that can be revoked at any time due to any reason.
if you wanted to do anything about it, you would have to argue that this type of contract isn’t fair. this would be a ridiculous massive suit because a large amount of software has this type of agreement attached to it. if the court ruled in your favour it would be hard to imagine the consequences.
It seems to me that there are number of glaring issues with your analysis.
Firstly, you simply assume that the American cases dealing with the non-consensual inclusion of arbitration clauses are determinative of the issue in an Australian context. Although an Australian Court will pay due deference to relevant foreign authorities, it certainly will not consider itself bound by them, and in this type of scenario I really do doubt that it would be inclined to adopt the same reasoning.
Secondly, you have also assumed that EULA’s of this nature are valid and capable of enforcement against ordinary consumers. There are no Australian cases which have considered this issue which is a threshold question that has to be addressed before the International Arbitration Act will be enlivened. That is, it can only be applied in respect of valid contracts.
Finally, you contend that the unfair contract terms of the Australian Consumer Law will likely operate to void the American-centric terms but that the involuntary arbitration clause would remain unscathed. It is not clear how you came to that conclusion, but if you looked at section 25 of the ACL you will see several examples of what may constitute an unfair term, including “a term that permits, or has the effect of permitting, one party (but not another party) to vary the terms of the contract” and “a term that limits, or has the effect of limiting, one party’s right to sue another party”.
So here we have scenario where a one sided shrink/click wrapped EULA formulated by the party claiming the entirety of the benefit of all its terms to the detriment of the end user is able to modify the terms and conditions at will, and in doing so has incorporated an arbitration clause which limits the consumer’s right to sue Valve. Do you honestly believe that an Australian Court would be prepared to condone such behavior?
HAI, I DID SKOOL AN STUF, CAN U TEL?
Thanks for your comment!
Few comments. :)
The American background was not to say that this would be determinative of the Australian courts. It was provided simply to say this is how the issue came to light in America. :) Valve’s agreement is very American-centric, and therefore any discussion must look at the American cases that led to it.
I assumed that EULAs are enforceable because, well… they’re very, very entrenched by now. As Skitzor has pointed out, every Australian with a computer is signed up to multiple EULAs. It would be a very brave court that found EULAs are invalid. While it’s true that no one in Australia has directly challenged one, I have no doubt that if such a challenge were to be raised, the court would side with the EULA.
As I joked in the article, every EULA article I write has someone saying EULAs are invalid. :) But the consequences of that would be severe for digital commerce. Too severe to be overturned by anything than a major, major case. And even if that happened, Parliament would likely legislate to overturn any such decision.
With regards to section 25 of the ACL, the text of that section is “may be unfair”. It’s not a general prohibition on such clauses. I believe the court would look at the contract as a whole, and judge it according to general principles of unfairness. I don’t believe arbitration to be unfair in this case to the consumer. It would generally save both parties money.
can’t you set all of your games to not update, and then have them work in offline mode? then just always use steam offline, right?
Patrick,
I draw your attention to the case of Bragg v Linden Research Inc, which looked at the recission of a licence to virtual property due to changes in an EULA and a breach thereof. This was for Second Life. Particular to the circumstances here, Bragg and Linden contained an arbitration clause that was found to be unconscionable. This issue of the recission of virtual property was further explored in a class action against Second Life in Evans et al v Linden Research. These cases were settled before they become precedent but they were certainly considered by the US courts. Your comments about EULAs being so entrenched as to be unchallengeable are just plain wrong. Click wraps might be entrenched, but the US courts have shown a willingness to entertain unconscionability when it comes to unilateral EULA changes. The Australian Courts are typically far more liberal, especially given equitable principles.
In Australia, the Trumpet v OzEmail case clearly outlines that a bare licence recission can be blocked by estoppel. There’s strong argument that a unilateral EULA licence revocation or constructive recission (albeit partial) would be blocked on equitable grounds.
It is all up in the air. We have brave courts. Careful with online legal advice (I hope your insurance is paid up for the games.on.net class action ;)).
-T.
Patrick Vuleta,
Again you are making some awfully large assumptions. The fact that they are common would not deter a Court from invalidating them, in fact Australian Courts will regularly make decisions which will throw industries and accepted industry practices into disarray. The broader industry implications are not determinative of the issue, because first and foremost a Court will look at the validity of the contract according to accepted principles of contract. Simply because an entire industry has been conducting itself according to a misplaced understanding of the law does not all of a sudden make it consistent with the law.
As you say, the real issue is the fact that no as yet has attempted to test what the law actually is. As for parliament legislating to over turn any such decision, well anything is possible, but I just do not see the government doing so in the face of all our other consumer protection legislation which is designed to protect users against these types of anti-consumer practices. And I am not sure how that would have any impact on digital commerce in so far as software is concerned.
Yes section 25 is couched in equivocal terms, but the fact that specific reference is made to such clauses is likely to be taken as a very strong indicator of the types of terms which will be characterised as unfair. That in turn will be compounded when construed in the context of the EULA, which more often than not, is very much drafted to the benefit of the developer/publisher rather than the end user. That in of itself will make a Court more receptive to arguments based on contra preferentum. I am fairly confident that given the right circumstances, and competent legal representation, that a consumer would be able to successfully challenge these EULA’s, but I don’t see that happening any time soon given the prohibitive cost of doing so.
This is opinion, not advice. As always though, if anyone needs individual advice, they need to hire their own lawyer.
As I’ve commented on previous articles, I’m actually very careful to avoid writing anything that says “YES! You have a case! Go and sue!” Because with an odd 150,000 readers, I have responsibilities not to be gun-ho.
But to directly reply to your Second Life example, I’ve not looked at that case, but my guess is that it had some kind of unfair term, like shifting costs onto the consumer. I covered that point in the article. I’m all for courts challenging unfair contracts. I just don’t see what’s so unfair about an arbitration. They happen every single day, for a huge range of matters.
What I do take issue with, is when people say “This is unfair!” without actually applying it to individual circumstances. An arbitration will cost you almost nothing if the company pays for it. Even a small claims case will cost you hundreds or thousands: no company will pay your legal representation. So which one do you want?
It often seems on these topics that having a day in court is so important that people will cut off their own nose to do so. A big part of being a lawyer is telling people they don’t have a case, not finding technicalities to do everything and anything.
Lastly, being entrenched doesn’t mean they’re unchallengable. It just means that there’s a great deal against it. For every example someone can give of courts going out on there own, you can have an example of Parliament overriding them when something is too commercially sensitive.
If you really want an example of industry pressure in this space, just look at our copyright law. It’s American law with some exceptions.
I don’t see any caveats in THIS article. You need to be careful. The use of the term “opinion” instead of “advice” won’t let you off the hook, especially not when you get into speculating what a court may or may not do.
But you don’t need to convince me. :) I’m not a law society. :)
I did pepper the article with words like ‘likely’ ‘my guess is’ and so on. I can always include a big, bolded disclaimer down the bottom, but I am very careful to use qualifiers.
I don’t know how to pm you. I’m not being an arse. I love node. I love your articles. I’m just being mindful.
Check out the Second Life case, anyway. I don’t know if anything much will change in the USA on a grand level but it’ll only take one case to go through to judgment. If the corps know what is good for them they’ll just keep settling to avoid precedent. :)
Well if it makes you feel better, check the end of the article now. ;)
For curiosity’s sake, I also went and looked at the Second Life case.
The distinctive issue with that case is that the plaintiff possessed virtual property. Actual real property, not licensed.
The other distinctive issue was that the terms of service was found to be unjustly biased towards Lindon Labs.
These points strike me as different to the Steam agreement in two important ways.
First, you have no actual property in your Steam account. Rather, you have software licenses. Individual court action is a bit more justified when you have something that’s real and yours to protect.
Second, I can’t find anything in the Steam contract which I consider to be unfair, personally. There’s nothing like “Loser has to pay all arbitration costs”.
If I thought the Steam agreement was unfair, I would write that. Maybe it sucks that you have to agree to their terms to play your games, but you’re not actually losing anything substantial by doing so.
Happy. :)
I’ll stop being a PIA now. :)
this thread has produced some really good discussion, so don’t feel like you’re being a PIA.
very interesting discussion, this UELA business usually bores me, but not THIS article and thread
I didn’t think anyone was arguing the arbitration part as unfair (Steam is actually being quite generous), rather the ban on class actions. That is the part where they are limiting consumer rights and essentially forcing it on them. Steam’s spill on its being better for you the consumer is just them being underhand. Paraphrased they have essentially said “we will take away your legal rights, but don’t worry we’re doing it as a favor for you.”
Thanks,. :)
I just didn’t want to get into a legal p*****g contest.
I guess the point I wanted to get across is this is a very fluid area, and the law isn’t settled. If America wants to continue to expand into new markets they’re going to run up against equitable and consumer law principles in other countries that will put their principles to the test.
I.E. Resale of digital games in the EU!
The article is fine how are you suppose to bring up this type of thing if you can’t even talk about it. I think the article is written in a fine way and steam does get me worried these days. It is a giant and some people think it should be the only download service we ever use.
I’m all for discussion. I’m appreciative of both Tori’s and Grind Runner’s contributions here.
One thing I always bear in mind is that there’s always two sides to any of these issues. I don’t mind people arguing against me, because that’s what the entire legal system’s about.
While I am in no way up with any from of law in Australia and the US and would never give advice on the matter I do have a few question.
Now while valve doesn’t want to be open to class actions, adding these terms to their Steam user agreement.
If it is found that Steam/Valve has done wrong via a class action suit then this could possibly open them up to a large pay out/change the way that they do business on a day to day base.
The only concern I guess I have is that going to arbitration at valve cost means that they can keep all the finding in private between to two parties and each and every person would have to go through the same process to show merit and cause as to the damages they have caused?
You would never be able to openly publish/talk about the finding from arbitration? I am sure you would end up signing away these rights?
Class action would make these details public? Thus name and shame them if they ever do something that could end up in court and affect the user base.
I don’t know….
Just questions/ideas I guess.
kablekill,
There would definitely be more publicity around a class action, however I think a big incentive for them is saving money. A class action would inevitably cost them a huge amount – especially as it generally attracts larger numbers of participants (I understand that it is quite easy to add your name to a class action list). Take the recent Vodafone class action for an example. If there was no class action involved it is likely only a very small percentage of those who got on board would have actually gone to arbitration with Vodafone. Class actions have the effect of getting lots of people involved, as they require much less effort for an individual consumer than arbitration does. Consequently they are expensive for the company being sued and also like you say generate a lot of negative publicity for them.
Tonight I fired up steam for the first time in about a week. Just wanted to play a game for a bit.
Steam updated, rebooted and presented me with their new terms. Not wanting to read all the fine details right now, I click disagree and am promptly ejected with no dialogs, no options.
I know, I know “If I want to play the game I purchased, just agree…”
I can’t bring myself to do it.
I always thought Steam was the best of a bad bunch: A grugding middle-ground where developers could feel somewhat protected by their DRM and consumers tolerated it because of great deals and peripheral services.
But this action of with-holding my games from me…it just plain sucks.
Guys please pitch in, particularly real lawyers, to correct me if I’m wrong here.
I think you’ve neatly summed up the general lack of understanding around this issue. It’s not a ‘ban’ on class actions – Valve are asking you as the customer to agree not to pursue class action in favour of arbitration.
Like all law there is an element of Russian Roulette to it, particularly with contracts. The way the term of this contract works, in layman’s terms, goes like this:
You and all your mates (read the pretzel people) get mad at Steam/Valve. You go to form a class action and you lodge the paperwork at court for said action. The court calls an initial hearing where a judge hears from both parties. The ‘Pretzel People’ (as they are now known for the remainder of this thread) mount their argument to the judge. Then the respondent (Steam/Valve) would mount their argument which would go like this:
‘Your Honour all the Pretzel People gladly accepted, as a part of the EULA of this product, to resolve any dispute they have with Valve in individual arbitration with costs met by the respondent (Valve). They are here in breach of that agreement entered into in good faith with Valve and thus wasting the court’s time and resources.’
At this point the judge has a choice. Just because that clause was in the contract doesn’t mean he is bound to uphold it. He may make the call that (obviously it totally depends on the nature of the complaint) Valve has acted out of line or not delivered on other elements of the EULA that they ask the consumer to enter into etc etc and rule that a class action is in fact valid.
However, as learned Comrade Vuleta points out, if Valve can mount the argument that their option provided in the EULA and agreed to by the consumer is an appropriate mechanism for resolution of the complaints in question and have been acting in good faith why would a court not uphold the terms of the contract?
Contracts are a core mechanism for business in any civil society and the courts have an interest in upholding them as they save everyone time and money. You enter into a contract and you’re bound by it, unless the jurisdiction it comes under has relevant consumer protection law.
Valve aren’t taking away, banning or prohibiting anything. They’re asking you to enter into an agreement or not use their service – and the courts have a choice to either uphold it or not. Remember that law is fluid (unless it’s an element of the US constitution).
So what I’m saying in a nutshell is this. The Valve EULA doesn’t actually stop you from lodging an application for a class action, it just gives the judge good incentive to throw it out of the court and tell you to abide by the agreement you entered into.
Thank you for providing the summary ;)
Personally my main gripe at this is not so much the actual ‘ban’ itself; more the phrasing it in a way that makes people think they are getting a big win by this agreement. Let’s face it – the changes were made purely to make things better for Steam.
As you and the author Patrick said, the answer to whether it would be valid is “yes and no.” Essentially until it has gone to Court it’s impossible to give a definite answer.
To be fair, arbitration is far cheaper than legal action for all parties. For the individual, even for a large group, arbitration is going to be preferable, especially in Australia. We don’t have quite the same class action culture as the States.
However if Valve really screw up big time, a class action would be a pretty big stick.
My concern was mainly with EULAs, equity and consumer law. All of which have an indirect, but fundamental, impact on any switches to arbitration agreements that are imposed on users.
matthewdev,
lol no dramas. I had no idea that post was going to be so long!
They’re not exactly going to let their comms department sell it as shit for the customer are they?
To be frank it’s not a bad deal really. Just because they pay for arbitration doesn’t mean they’re going to get a good deal out of it – usually it’s pretty good for the consumer and saves them the bad publicity of a class action.
And you’re absolutely right. Until its tested in court no one has a clue how it’ll go.