Case 3:21-cv-03447 Document 1 Filed 05/07/21 Page 1 of 27
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`Joseph R. Saveri (State Bar No. 130064)
`Steven N. Williams (State Bar No. 175489)
`Kate Malone (State Bar No. 290884)
`Chris K.L. Young (State Bar No. 318371)
`Kyle P. Quackenbush (State Bar No. 322401)
`Anupama K. Reddy (State Bar No. 324873)
`JOSEPH SAVERI LAW FIRM, LLP
`601 California Street, Suite 1000
`San Francisco, California 94108
`Telephone: (415) 500-6800
`Facsimile: (415) 395-9940
`Email: jsaveri@saverilawfirm.com
`swilliams@saverilawfirm.com
`kmalone@saverilawfirm.com
`cyoung@saverilawfirm.com
`kquackenbush@saverilawfirm.com
`areddy@saverilawfirm.com
`
`Counsel for Plaintiff and the Proposed Class
`
`
`
`
`UNITED STATES DISTRICT COURT
`NORTHERN DISTRCT OF CALIFORNIA
`SAN FRANCISCO DIVISION
`
`ADRIAN CENDEJAS, on behalf of himself
`and all others similarly situated,
`
`
`Plaintiff,
`
`v.
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`
`
`
`SONY INTERACTIVE ENTERTAINMENT
`LLC and SONY GROUP CORPORATION,
`
`
`
`
`
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`
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`Defendants.
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`Civil Action No.
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`CLASS ACTION COMPLAINT
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`DEMAND FOR JURY TRIAL
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`Case 3:21-cv-03447 Document 1 Filed 05/07/21 Page 2 of 27
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`1.
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`Plaintiff Adrian Cendejas, on behalf of himself and all others similarly situated,
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`bring this Class Action Complaint against Sony Interactive Entertainment LLC and Sony Group
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`Corporation (collectively, “Sony” or “Defendants”) for violations of Sections 2 and 3(b) of the
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`Sherman Act, 15 U.S.C. §§ 2 and 3(b), and Section 4 of the Clayton Act, 15 U.S.C. § 15(a), as
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`follows:
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`INTRODUCTION
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`2.
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`Sony, operating from San Mateo, California, is one of the largest consumer
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`electronics manufacturers in the world, and one of the dominant makers of video game consoles.
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`In 1994, Sony launched its first video game console, the PlayStation. Sony’s release of the
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`PlayStation elicited critical acclaim and strong sales; in less than a decade, it became the first
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`computer entertainment platform to ship over 100 million units. Sony revolutionized the console
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`industry with its use of optical discs, heralding the console industry’s transition away from
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`cartridges.
`3.
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`Sony has since released five models of the PlayStation—its latest, the PlayStation
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`5 (“PS5”) released to much fanfare on November 12, 2020 in the United States. The PS5 comes
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`in two versions, including a digital-only version, called the PlayStation 5 Digital Edition (“PS5
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`DE”).
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`4.
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`Both versions of the PS5 include hardware (a specialized gaming computer known
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`as a console) and software (the operating system that allows users to play video games). Sony’s
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`operating system runs various applications, including Sony’s PlayStation Store where users can
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`purchase digital copies of video games.
`5.
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`This action concerns Sony’s antitrust violations in the market for video games
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`played on the PS5 DE. Among other things, Sony tied the PlayStation Store to the PS5 DE,
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`relying on its monopoly power in the console market to acquire market share in the PS5 video
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`game distribution market. In addition, Sony eliminated competition in the PS5 video game
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`distribution market by refusing to allow retail outlets to sell digital copies of PS5 video games.
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`This conduct is anticompetitive and violates federal antitrust law.
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`Case 3:21-cv-03447 Document 1 Filed 05/07/21 Page 3 of 27
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`6.
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`Before the PS5 DE was released, consumers could purchase PlayStation
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`video games from game developers and retailers including Amazon, GameStop, Walmart, and
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`Target, among others, on Blu-ray discs that could be inserted into the PlayStation console or in
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`the form of digital download codes that allow for downloading the game to the console. Because
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`the PS5 DE lacks a disc drive, consumers are limited to purchasing digital download codes from
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`retailers and digital copies of games from the PlayStation Store.
`7.
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`Recognizing the price competition digital download codes poses, Sony made the
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`anticompetitive decision to refuse to allow retail outlets to sell video games through digital
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`download codes.
`8.
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`Consumers are thus forced to purchase PS5 games on the PlayStation Store—an
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`application owned and operated by Sony that is pre-loaded on the PS5 DE. Sony does not allow
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`other applications that enable consumers to play video games to run on the PS5 DE. Nor does
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`Sony allow digital download codes sold by retailers to be redeemed through the PlayStation
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`Store. Consumers that purchase a PS5 DE are left with two choices: purchase games directly
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`from Sony using the PlayStation Store, or purchase another console for hundreds of dollars. For
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`those customers who have been in the Sony game console environment for years this is a negative
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`result personally and economically.
`9.
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`Consumers face major costs to switch between PlayStation and Xbox. For
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`example, video games available on the PS4 can be played on the PS5, but cannot be played on the
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`Xbox. Consumers that have built up a library of PS4 games would lose hundreds, if not
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`thousands, of dollars if they switched to Xbox. Also, consumers that use PlayStation are
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`accustomed to the use of the PlayStation controller and gameplay, and have developed social
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`networks within the PlayStation ecosystem that they would lose if they switched to Xbox. Finally,
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`certain games are available only in the PlayStation ecosystem, not on Xbox.
`10.
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`Sony’s conduct insulates it from price competition and enables it to charge
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`supracompetitive prices for PS5 video games. Sony charges publishers an approximately 30%
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`commission for every game purchased through the PlayStation Store. This exorbitant
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`Case 3:21-cv-03447 Document 1 Filed 05/07/21 Page 4 of 27
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`commission is passed on to consumers, who end up paying higher prices than they otherwise
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`would have. Sony also effectively quashes the secondary market for PS5 games—consumers can
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`no longer buy and sell their used games at significantly reduced prices. Instead, each time a
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`consumer wants to purchase a PS5 video game—whether a recent or older release—it must
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`purchase a new digital copy from PlayStation through the PlayStation Store.
`11.
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`Sony’s decision to tie the PlayStation Store with the PS5 and to eliminate
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`competition from retailers and game developers that could sell digital download codes is
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`anticompetitive. Sony’s decision was made solely to eliminate competition and enable it to
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`charge supracompetitive prices for PS5 DE video games. There are no procompetitive
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`justifications for its decision.
`12.
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`As a result of Sony’s unlawful acquisition and maintenance of a monopoly over
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`the sale of PS5 video games, Plaintiff and the Class have paid and will continue to pay significant
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`overcharges. Plaintiff seeks damages equal to the amount he has already overpaid, treble
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`damages, and injunctive relief to end the overcharges he will continue to pay until competition is
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`restored to the market.
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`THE PARTIES
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`13.
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`Plaintiff Adrian Cendejas is a resident of California. Plaintiff has purchased, and
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`will continue to purchase, digital copies of video games directly from Sony through the
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`PlayStation Store to be played on his PS5 DE. Plaintiff has been injured, and will continue to be
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`injured, in his property by paying supracompetitive prices for these video games.
`14.
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`Defendant Sony Interactive Entertainment LLC (“SIE”) is a corporation
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`organized and existing under the laws of California, with its headquarters and principal place of
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`business at 2207 Bridgepointe Parkway, San Mateo, California. SIE undertakes product research,
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`development, design, marketing, sales, production, distribution and customer service for
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`PlayStation hardware, software, content, and network services. SIE is a wholly owned subsidiary
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`of the Japanese consumer electronics and media conglomerate Sony Group Corporation.
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`Case 3:21-cv-03447 Document 1 Filed 05/07/21 Page 5 of 27
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`15.
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`Defendant Sony Group Corporation is a corporation organized and existing under
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`the laws of Japan with its principal place of business at 7-1, Konan 1-Chome, Minato-Ku, Tokyo
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`108-0075, Japan. Sony Group Corporation is the parent corporation of SIE.
`16.
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`SIE and Sony Group Corporation are collectively referred to as “Sony.”
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`JURISDICTION AND VENUE
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`17.
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`Plaintiff brings this action on his own behalf as well as that of the Class to recover
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`damages, including treble damages, costs of suit, and reasonable attorneys’ fees arising from
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`Defendants’ violations of Section 2 and 3(b) of the Sherman Act (15 U.S.C. §§ 2 and 3(b)) and
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`Section 4 of the Clayton Act, 15 U.S.C. § 15(a), as well as any and all equitable relief afforded
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`them under the federal laws pled herein.
`18.
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`Jurisdiction and venue are proper in this judicial district pursuant to Section 12 of
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`the Clayton Act (15 U.S.C. § 22), and 28 U.S.C. § 1391(b), (c) and (d), because a substantial part
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`of the events giving rise to Plaintiff’s claims occurred in this District, a substantial portion of the
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`affected interstate trade and commerce was carried out in this District, and Sony resides in this
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`District and is licensed to do business in this District. Sony has transacted business, maintained
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`substantial contacts, and/or committed overt acts in furtherance of the illegal scheme throughout
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`the United States, including in this district. The scheme has been directed at, and has had the
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`intended effect of, causing injury to persons residing in, located in, or doing business throughout
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`the United States, including in this District.
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`INTRADISTRICT ASSIGNMENT
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`19.
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`Pursuant to N.D. Cal. Civ. L.R. 3-2(c), (d) & 3-5(b), this action is properly
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`assigned to the San Francisco division because a substantial part of the events and omissions
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`which give rise to the claim emanated from California and more specifically San Mateo County.
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`FACTUAL ALLEGATIONS
`A. Video Game Industry
`20.
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`Video games are played on one of four electronic platforms: (i) smartphones; (ii)
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`personal computers (“PCs”); (iii) arcade game consoles; or (iv) personal game consoles. This
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`Case 3:21-cv-03447 Document 1 Filed 05/07/21 Page 6 of 27
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`case concerns personal game consoles, specifically the PS5 DE, and video games that are played
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`on that console.
`21.
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`A personal video game console is an electronic device similar to a personal
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`computer that outputs a video signal or visual image to display a video game that one or more
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`people can play through some type of game controller. These may be home consoles which are
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`generally placed in a permanent location connected to a television or other display device and
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`controlled with a separate game controller, or handheld consoles that include their own display
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`unit and controller functions built into the unit and can be played anywhere. Personal game
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`consoles are small personal computers designed specifically to play video games. They have
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`limited if any functionality beyond playing video games and streaming movies.
`22.
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`Initial consoles were dedicated units with only a few games fixed into the
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`electronic circuits of the system (e.g., PacMan at the local arcade). However, video gaming was
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`revolutionized with the advent of personal consoles that individuals could buy and use in their
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`homes. Most personal consoles originally utilized ROM cartridges, swappable game media that
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`enabled users to play separate games simply by inserting a new cartridge.
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`Figure 1: ROM Cartridge
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`23.
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`ROM cartridges allowed the user to rapidly load and access programs and data
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`without using a floppy drive, which was an expensive peripheral during the home computer era,
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`and without using slow, sequential, and often unreliable Compact Cassette tape. An advantage
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`Case 3:21-cv-03447 Document 1 Filed 05/07/21 Page 7 of 27
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`for the manufacturer was the relative security of the software in cartridge form, which was
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`difficult for end users to replicate. However, cartridges were bulky and expensive to manufacture.
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`As disc drives became more common and software expanded beyond the practical limits of ROM
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`size, cartridge slots disappeared from later game consoles and personal computers.
`24. Optical discs replaced ROM cartridges in consoles by the early 2000’s. Optical
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`discs are direct access storage devices that are written and read by light. The most common types
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`are CD, DVD and Blu-ray. Optical discs superseded the earlier ROM cartridges because they
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`weighed less, were cheaper to manufacture, and had higher storage capacities. However, optical
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`discs have disadvantages as well. They cost more per GB/TB than any other forms of storage
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`devices. Unless it is a Blu-ray disk, the maximum storage the optical discs can offer is 4.7GB.
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`Also, they are prone to scratching which makes the disk unusable.
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`Figure 2: Optical Discs
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`25.
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`Then came advances in internet bandwidth. Video on demand and online
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`streaming replaced the need for the console hardware required for multimedia tasks such as
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`playing audio and video discs. Game developers and retail outlets began selling digital download
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`codes that users could purchase online, and console manufacturers began to load digital stores
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`onto their consoles for instant access to video games.
`26.
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`Streaming and digital downloads offered convenience—a user no longer had to go
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`to the store to purchase a disc or wait for one to arrive through an online store. Now, video games
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`could be purchased and played instantly with a click of a button or by entering a code into the
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`console. Also, theoretically, digital downloads were cheaper. There is virtually no marginal cost
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`to an additional download, unlike discs which had to be manufactured, loaded with media, and
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`transported to consumers.
`27.
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`Digital downloads are projected to dominate the market. Minami Munakata, an
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`analyst at Goldman Sachs, estimated that the ratio of digital game sales compared to disc-based
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`sales would likely rise from around 51 per cent now to 80 per cent by 2025.
`28.
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`This shift towards digital downloads has presented opportunities for those
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`companies that can control the digital space. Revenues from video games reached approximately
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`$170 billion worldwide in 2020.1 These revenues are projected to reach $277.95 billion worldwide
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`by 2025.2
`29.
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`For the past two decades, three companies have dominated the market for
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`personal video game consoles: Sony, which manufactures the PlayStation; Microsoft,
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`manufacturer of the Xbox; and Nintendo. All three companies periodically release new models of
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`their consoles, with updated hardware and software and new design features.
`30. Nintendo has the longest history of the three, having released a dozen models
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`since its 1985 debut. Microsoft and Sony have released fewer versions of their home consoles—
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`four versions of the Xbox have been released since 2001 and five versions of the PlayStation have
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`been released since 1994.
`31.
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`Sony, Xbox and Nintendo are not limited to manufacturing and selling video game
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`consoles; each also develops and publishes video games. Most PlayStation games come from
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`
`1 Global Video Game Software Market Report 2021, BusinessWire (Mar. 9, 2021),
`https://www.businesswire.com/news/home/20210309005558/en/Global-Video-Game-Software-
`Market-Report-2021-Long-term-Forecast-to-2025-2030-Featuring-Major-Players---Sony-
`Activision-Blizzard-Microsoft-EA-and-Nintendo---ResearchAndMarkets.com
`2 Id.
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`outside developers, while Nintendo develops most of the games for its consoles in-house. The
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`market for Xbox games is more evenly split, with approximately 30% developed by Microsoft.
`32.
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`Video games are not cross-console compatible. For example, a game developed for
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`the PlayStation will not run on an Xbox, and vice versa. However, developers often release
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`versions of their games for all three consoles.
`B. Sony PlayStation
`33.
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`Sony is one of the largest manufacturers of video game consoles in the world. In
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`1994, Sony launched its first video game console, the PlayStation. Sony’s release of the
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`PlayStation elicited critical acclaim and strong sales; in less than a decade, it became the first
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`computer entertainment platform to ship over 100 million units. Sony revolutionized the console
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`industry with its use of optical discs, heralding the console industry’s transition away from
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`cartridges.
`34.
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`The PlayStation is a computer specially designed for gaming that connects to a
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`display (either a TV, computer monitor, or projector) to enable users to play video games from
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`the comfort of their homes. Sony sells the hardware—the physical console—which is preloaded
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`with the operating system that enables consumers to play games and run various applications,
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`including the PlayStation Store.
`35.
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`Over the last two and a half decades, Sony has released five updated versions of
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`the PlayStation—sequentially numbered 1 through 5. Sony’s latest version—the PS5—was
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`released on November 12, 2020. The new system is available in two versions: a standard model
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`(“PS5”), available for $499 retail, and the PS5 DE, which sells for $399 retail.
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`Case 3:21-cv-03447 Document 1 Filed 05/07/21 Page 10 of 27
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`Figure 3: PlayStation 5 and PlayStation 5 Digital Edition
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`36.
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`The PS5 includes an optical disc drive, providing users with two option: to (i)
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`continue purchasing physical disc copies of games, available from retailers or game developers; or
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`(ii) buy digital-only copies and download them to their consoles. By contrast, the PS5 DE does
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`not include a disc drive, meaning users can only purchase digital games.
`37.
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`The PS5 is backward compatible with the overwhelming majority of PS4 games.
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`This means that most PS4 games will play on the PS5.
`38.
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`As of March 31, 2021—just four months after its initial release—Sony had sold 7.8
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`million PS5 consoles, making it the fastest selling console in U.S. history.3 Through these sales,
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`Sony has earned over $3 billion in revenue.4 These astronomical sales were achieved despite
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`Sony’s inability to supply anywhere close to enough units due to supply-chain failures caused by
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`the coronavirus pandemic.5 Sales are predicted to surpass 200 million units.
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`3 Sony PS5 now fastest-selling console in US history in both unit and dollar sales, says NPD,
`CNET (Apr. 16, 2021), https://www.cnet.com/news/sony-ps5-now-fastest-selling-console-in-us-
`history-in-both-unit-and-dollar-sales-says-npd/
`4 See N.F. Mendoza, PlayStation rakes in $2.6 billion in PS5 sales, TechRepublic (Feb. 25,
`2021), https://www.techrepublic.com/article/playstation-rakes-in-2-6-billion-in-ps5-sales/
`(noting PlayStation 5 generated $2.6 billion in sales with 5.21 million counsels sold)
`5 Still Looking for a New Gaming Console? Here’s Why, The New York Times (Jan. 29, 2021),
`https://www.nytimes.com/2021/01/29/business/ps5-xbox-console-shortage.html
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`39.
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`Despite record revenue from the PS5, Sony claims it sells its console at a loss.6
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`Yet Sony realizes huge profits due to the profit maximizing ecosystem it has built around its
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`console. Sony has used the console’s popularity to build PlayStation into a multifaceted digital
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`entertainment brand which includes an online store for purchasing and downloading digital video
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`games directly to the console (the PlayStation Store), a unified online multiplayer gaming and
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`digital media delivery service (the PlayStation Network), a subscription-based digital video game
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`streaming service (PlayStation Now), a digital movie and TV distribution service (PlayStation
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`Video), and Sony’s video game development arm (SIE Worldwide Studios).
`40.
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`The PlayStation Store launched on November 11, 2006, available on the
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`PlayStation 3 console. Since the launch of the original PlayStation in 1994, PlayStation games had
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`been available only on discs. Starting in 2006, users could access the PlayStation Store and
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`purchase games directly from their console, and then download them through the PlayStation
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`Network, which launched at the same time to facilitate the delivery of digital content. Users
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`could also purchase download codes from the same retailers who sell physical games such as
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`Amazon, GameStop, Walmart, and Target. The codes could be redeemed on the PlayStation
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`Network for digital copies of PlayStation games. The Network also allowed users to play games
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`online against their friends in different locations.
`41.
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`Sony generates the bulk of its profits from digital downloads available through the
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`PlayStation Store. In 2020, digital downloads made up 62% of sales for PlayStation games,
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`compared to only 43% in 20187 and Sony earned $1.76 billion in revenues in the third quarter of
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`6 PS5 Is Being Sold At A Loss, Yet Sony Is Posting Record Profits, Forbes (Feb. 3, 2021),
`https://www.forbes.com/sites/paultassi/2021/02/03/ps5-is-being-sold-at-a-loss-yet-sony-is-
`posting-record-profits/?sh=791c06185fd2
`7 Mustafa Mahmoud, 62% of all full PlayStation game sales were digital in 2020, Kitguru (Mar.
`12, 202), https://www.kitguru.net/gaming/mustafa-mahmoud/62-of-all-full-playstation-game-
`sales-were-digital-in-2020/
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`Case 3:21-cv-03447 Document 1 Filed 05/07/21 Page 12 of 27
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`fiscal year 2020 alone through digital sales in the PlayStation Store.8 These revenues will
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`continue to grow as more and more people buy PlayStation 5, and as those who have already
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`purchased one continue buying new games.
`C. Sony Ties the PlayStation Store to the PS5 DE
`42.
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`As discussed above, the PS5 DE includes two components—hardware and
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`software—that enable consumers to play video games. The hardware comes preloaded with
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`Sony’s proprietary operating system (“OS”), and users are not able to substitute Sony’s OS for
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`another company’s OS. This differs from the personal computer market, where Dell, HP,
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`Lenovo, and others sell the hardware—the PCs—and users can load various OS, such as Apple’s
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`iOS, Microsoft’s Windows or Linux. You cannot run the Xbox’s OS on a PS5.
`43.
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`Sony’s OS includes the PlayStation Store—an online marketplace from which
`
`users can purchase games on to their device. The PlayStation Store comes pre-loaded onto the
`
`PS5 DE and there is no way to remove it. There is also no other option to purchase games on the
`
`PS5 DE—a user must use the PlayStation Store.
`44.
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`To use the PlayStation Store, a user must create a master account. A log of all
`
`previously purchased items, known as “Download List,” records each PlayStation
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`Store account’s complete download activity. Each master account is associated with an online
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`virtual “wallet” to which funds can be added. This wallet is then debited when a purchase is
`
`made from the store. Money can be added to the wallet through different systems of payment,
`
`including credit cards, debit cards, PayPal transfers and prepaid gift cards, but the wallet does not
`
`accept cash.
`45.
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`To purchase digital games through the PlayStation Store, users must use the
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`PlayStation wallet. Each time a user transacts using the PlayStation wallet, Sony charges
`
`
`8 Andy Robinson, Sony’s gaming business is on course for its best-ever year in terms of revenue
`and profit, its latest financial results have suggested, VGC (Feb. 3, 2021),
`https://www.videogameschronicle.com/news/playstation-is-on-course-for-its-best-ever-year-
`with-4-5m-ps5s-now-shipped/
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`publishers a commission fee. Upon information and belief, that commission fee is as high as 30%.
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`Sony tied the PlayStation Store to the PS5 DE to allow it to charge supracompetitive commission
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`fees. These supracompetitive commission fees were then passed on to consumers, resulting in
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`higher prices for digital copies of PS5 video games.
`D. Sony Forces Customers to Purchase Games Through the PlayStation Store
`46. Despite Sony’s control over the market for digital copies of PS5 video games
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`purchased through the PlayStation Store, it faced one potential source of competition.
`
`Historically, consumers could purchase digital download codes for PlayStation games. A
`
`consumer could purchase the digital download code online or instore from a variety of retailers or
`
`visit a game publisher’s website to purchase the code. The consumer could then input the code
`
`on the PlayStation and begin playing a digital copy of the game.
`47.
`
`In anticipation of the PlayStation 5 launch, Sony eliminated retailers’ ability to sell
`
`digital download codes for PlayStation video games, thereby entrenching its monopoly power
`
`over the PlayStation Digital Game Distribution market.9 In a statement released on March 26,
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`2019, Sony confirmed what had been circulating as rumor for a number of days, that as of April 1,
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`2019, Sony would “no longer offer full games through SIE’s Global Digital at Retail program.”10
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`In other words, Sony would no longer give retailers the ability to sell digital download codes.
`48.
`
`Sony claimed the decision “was made in order to continue to align key businesses
`
`globally.”11 In reality, Sony made this decision to monopolize the PlayStation Digital Game
`
`
`9 Sony to Stop Retailers Selling PS4 Game Codes on April 1, PCMag (Mar. 26, 2019),
`https://www.pcmag.com/news/sony-to-stop-retailers-selling-ps4-game-codes-on-april-
`1#:~:text=Sony%20has%20decided%20retailers%20can,from%20sale%20on%20April%201.&t
`ext=The%20decision%20impacts%20all%20retailers,PS4%20game%20in%20digital%20form
`10 Sony confirms it will no longer provide full game digital download codes to shops, Eurogamer
`(Mar. 26, 2019), https://www.eurogamer.net/articles/2019-03-26-sony-confirms-plans-to-stop-
`giving-shops-full-game-download-codes-to-sell
`11 Id.
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`Distribution market. For purchasers of the PS5 DE, the only way they can acquire video games
`
`for their system is to purchase them via the PlayStation Store.
`49.
`
`Purchasing digital download codes through brick-and-mortar retail outlets has
`
`several distinct advantages. First, retail availability of digital game codes was especially useful for
`
`players who did not or could not use a credit card on the PlayStation Store. Second, consumers
`
`could make use of trade-in credit from physical games and participate in a robust resale network
`
`of buying and selling games second-hand. Third, retail outlets often provided special promotions
`
`to attract customer traffic to their store, offering video games at a lower price compared to the
`
`PlayStation Store. Fourth, retail outlets offered advice and recommendations from in-store
`
`associates, which was particularly useful given the number of games purchased as gifts by
`
`parents, grandparents, and relatives for children and young adults.
`50.
`
`Sony’s new restrictions established a monopoly over the PlayStation Digital Game
`
`Distribution market, swiftly and effectively foreclosing all retail price and quality competition on
`
`these games. As a direct and proximate result, purchasers of the PS5 DE are forced to pay
`
`supracompetitive prices for video games, since they have no option to buy games on discs.
`
`Purchasers of the PS5 DE are also unable to benefit from retail outlets’ many benefits, including
`
`knowledgeable sales personnel and the aftermarket resale network.
`51.
`
`On information and belief, Sony—through SIE Worldwide Studios—charges a
`
`30% commission to publishers for all content sold on its PlayStation Store, including video games.
`
`Moreover, to sell games on the PlayStation Store developers and publishers of video games must
`
`agree to give Sony complete control over the resale price. By contrast, on information and belief,
`
`Sony charges an 11.5% Platform Royalty Fee for physical games sold at external retailers. Retailers
`
`retain the right to set their resale prices (i.e., the retail markup). Besides the Royalty Fee and the
`
`retail markup, the rest of the purchase price of video games goes to the developer.
`52.
`
`Because of the large commission rate, prices for video games available in the
`
`PlayStation Store are higher than they would be if publishers retained the right to set prices and
`
`retailers could dictate the resale markup. When a consumer buys a video game for their PS5 DE,
`
`
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`Case 3:21-cv-03447 Document 1 Filed 05/07/21 Page 15 of 27
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`and they have no choice but to purchase it from the PlayStation Store, they pay the full purchase
`
`price, including Sony’s 30% commission, directly to Sony.
`53.
`
`In contrast to Sony, Microsoft and Nintendo each allow consumers to buy
`
`download codes from the same retailers who sell games on disc, which they then use to download
`
`the games directly to their consoles.
`E. Sony Attempts to Stack the Deck in its Favor
`54.
`
`In 2020, Sony purchased a $250 million stake in Epic Games, the developer
`
`behind the popular game Fortnite.12 Sony invested an additional $200 million in 2021, making a
`
`combined investment of $450 million.13 Fortnite is offered for free on game consoles, including
`
`the PS5, on PCs, and on mobile devices. Fortnite generates all its revenue through in-game
`
`purchases.
`55.
`
`In 2020, Epic sued Apple and Google, arguing that the companies violated the
`
`antitrust laws through conduct related to their mobile app stores. Specifically, Epic argued that
`
`Apple and Google unlawfully maintain monopoly power over their application store distribution
`
`markets, “including by imposing technical and contractual restrictions on [their operating
`
`system], which prevents the distribution of [] apps through means other than the App Store and
`
`prevents developers from distributing competing app stores to [] users.”14
`56. Hedging its bets, Epic also introduced legislation to several state legislatures that
`
`would allow developers to avoid paying Apple and Google’s app store fees.15 Curiously, the bills
`
`12 https://www.theverge.com/2020/7/9/21318978/sony-epic-games-fortnite-investment-250-
`million-game-development
`13 Sony Invests Another $200 Million in Epic’s Latest Billion-Dollar Funding Round,
`WCCFTech (Apr. 13, 2021), https://wccftech.com/sony-invests-epic-games-another-200-million/
`14 Epic Games is suing Apple, The Verge (Aug. 13, 2020), https://www.theverge.com/2020/8/13/
`21367963/epic-fortnite-legal-complaint-apple-ios-app-store-removal-injunctive-relief
`15 Epic Games And Match Group Are Pushing States To Pass App Store Regulation That Would
`Hurt Apple And Google, Forbes (Mar. 4, 2021), https://www.forbes.com/sites/rachelsandler
`/2021/03/04/epic-games-and-match-group-are-pushing-states-to-pass