dismissed —
Monopoly arguments are "viable," but missing revenue details scuttle case for now.
A judge has dismissed a class action lawsuit that argued Sony was abusing its monopoly power in the digital PlayStation games market. But the dismissal leaves room for an amended complaint with additional factual context to move forward with the same "viable" antitrust arguments.
The lawsuit, originally filed last May, hinged on Sony's 2019 decision to stop allowing physical and online retailers from selling digital download codes for games on the PSN store (as Nintendo and Microsoft still allow). That decision was "specifically intended to and did eliminate price competition from other digital video game retailers," the lawsuit alleged, forcing players "to pay a higher price for digital PlayStation games than they would in a free and unrestrained competitive retail market."
But in a ruling filed last week (as noted by Bloomberg Law), Northern California District Judge Richard Seeborg wrote that the class action plaintiffs didn't provide "sufficient factual detail" that Sony "voluntarily terminated a profitable practice" in removing the retail download codes.
That kind of evidence—showing that Sony made an unprofitable business decision in the short run to secure longer-term monopoly profits—is a necessary part of a Sherman Act antitrust complaint. But while the lawsuit points out that Sony takes an 11.5 percent fee from physical retail game sales and a 30 percent fee from digital sales on PSN, the plaintiffs do "not state whether a royalty fee also applied to download code sales [at retailers]."
"Although it seems almost certain that Sony gained some revenue through download codes, and Plaintiffs need not at this stage prove that the practice was profitable, Plaintiffs must at a minimum describe the process through which Sony earned money from the practice," Judge Seeborg wrote. "The Court cannot assume the practice was profitable when Plaintiffs have failed to plead how Sony received any money through the practice."
A “viable” monopoly argument?
That factual matter aside, Judge Seeborg wrote elsewhere in the ruling that general arguments regarding Sony's exercise of monopoly power were "viable at this stage in the proceedings."
While Sony controls only a small portion of the overall market for downloadable console games (i.e., those on PlayStation consoles), Judge Seeborg noted that "a PlayStation user wishing to find a lower price for a digital game would have to look at the games for an entirely different console, necessitating another console purchase in the hundreds of dollars." That kind of platform "lock-in" could establish Sony legally as the kind of "single-brand" monopoly that was famously exemplified in the Kodak v. Image Technical Services case.
Judge Seeborg also specifically noted how Sony's position here is different from that of Valve, which is facing its own lawsuit over its alleged anticompetitive control over the Steam game marketplace. In that case, "the Steam platform was free to users, and only the games cost money," Seeborg wrote, meaning that "unlike for PlayStation users, a Steam user could switch to a game on a different platform upon seeing a price differential between the Steam Store and another online digital game store." While that argument ignores other non-monetary barriers to switching platforms (like Steam users' friends lists, prior unlocked achievements, in-game items, etc.), switching PC game platforms is indeed generally cheaper than switching console platforms.
If the plaintiffs in the Sony case can provide specific new evidence of how Sony made money from retail download code sales, they have 30 days to file an amended complaint. A successful amendment of that type doesn't seem out of the question, either; while the lawsuit against Valve was initially dismissed last November, an amended version with "additional context" was ruled "sufficient to plausibly allege unlawful conduct" in May.
