throbber
Case 2:21-cv-00563-JCC Document 37 Filed 07/26/21 Page 1 of 33
`
`The Honorable John C. Coughenour
`
`UNITED STATES DISTRICT COURT
`FOR THE WESTERN DISTRICT OF WASHINGTON AT SEATTLE
`
`WOLFIRE GAMES, LLC, William Herbert
`and Daniel Escobar, individually and on
`behalf of all others similarly situated,
`
`Case No. 2:21-cv-00563-JCC
`
`
`
`
`v.
`
`VALVE CORPORATION,
`
`Plaintiffs,
`
`Defendant.
`
`SEAN COLVIN, EVERETT STEPHENS,
`RYAN LALLY, SUSANN DAVIS, and
`HOPE MARCHIONDA, individually and on
`behalf of all others similarly situated,
`
`
`
`
`
`VALVE CORPORATION,
`
`
`
`
`
`
`v.
`
`
`
`
`
`
`
`Case No. 2:21-cv-00650-JCC
`
`DEFENDANT VALVE CORPORATION’S
`MOTION TO DISMISS PLAINTIFFS’
`CONSOLIDATED AMENDED CLASS
`ACTION COMPLAINT
`
`
`NOTE ON MOTION CALENDAR:
`September 17, 2021
`
` Plaintiffs,
`
`
`
` Defendant.
`
`DEFENDANT VALVE CORPORATION’S MOTION TO
`DISMISS - (2:21-CV-00563-JCC)
`
`FOX ROTHSCHILD LLP
`1001 FOURTH AVENUE, SUITE 4500
`SEATTLE, WA 98154
`206.624.3600
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`Case 2:21-cv-00563-JCC Document 37 Filed 07/26/21 Page 2 of 33
`
`TABLE OF CONTENTS
`
`Page
`
`INTRODUCTION ............................................................................................................. 1
`STATEMENT OF FACTS ................................................................................................ 3
`ARGUMENT ..................................................................................................................... 6
`A.
`LEGAL STANDARD ............................................................................................ 6
`B.
`PLAINTIFFS FAIL TO ALLEGE THAT VALVE’S CONDUCT IN ITS
`FREE STEAM KEYS PROGRAM VIOLATES THE ANTITRUST
`LAWS .................................................................................................................... 6
`PLAINTIFFS’ CLAIM THAT VALVE APPLIES THE ALLEGED
`PMFN TO SALES NOT INVOLVING STEAM KEYS FAILS TO
`ALLEGE INJURY TO COMPETITION .............................................................. 9
`PLAINTIFFS FAIL TO ALLEGE ANTITRUST INJURY ................................ 12
`1.
`PLAINTIFFS MUST PLAUSIBLY ALLEGE ANTITRUST
`INJURY ................................................................................................... 12
`PLAINTIFFS PREDICATE THEIR ALLEGED INJURY ON
`VALVE’S PRICE BEING SUPRACOMPETITIVE .............................. 12
`PLAINTIFFS’ MARKET ALLEGATIONS RENDER
`SUPRACOMPETITIVE PRICING IMPLAUSIBLE.............................. 13
`OTHER ALLEGATIONS DO NOT CURE THE IMPLAUSIBLE
`SUPRACOMPETITIVE PRICE .............................................................. 16
`PLAINTIFFS’ ALLEGED NON-PRICE ANTITRUST INJURIES
`ARE ALSO IMPLAUSIBLE ................................................................... 18
`PLAINTIFFS’ SHERMAN ACT SECTION 1 CLAIM AND SECTION 2
`CLAIMS BASED ON SEPARATE PRODUCT MARKETS FOR
`GAMES AND GAMING PLATFORMS FAIL FOR LACK OF A
`FACIALLY SUSTAINABLE MARKET DEFINITION .................................... 19
`1.
`PLAINTIFFS’ SEPARATE-PRODUCTS ALLEGATIONS ARE
`IMPLAUSIBLE UNDER THE MODERN INTEGRATION TEST
`THE D.C. AND NINTH CIRCUITS APPLY ......................................... 20
`PLAINTIFFS’ SEPARATE-PRODUCTS ALLEGATIONS ARE
`IMPLAUSIBLE UNDER THE OLDER JEFFERSON PARISH
`CONSUMER DEMAND TEST .............................................................. 22
`PLAINTIFFS’ STATE CPA CLAIM FALLS WITH THEIR FEDERAL
`ANTITRUST CLAIMS ....................................................................................... 24
`CONCLUSION ................................................................................................................ 24
`
`C.
`
`D.
`
`E.
`
`F.
`
`2.
`
`3.
`
`4.
`
`5.
`
`2.
`
`
`I.
`II.
`III.
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`IV.
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`DEFENDANT VALVE CORPORATION’S MOTION TO
`DISMISS - (2:21-CV-00563-JCC) - i
`
`
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`FOX ROTHSCHILD LLP
`1001 FOURTH AVENUE, SUITE 4500
`SEATTLE, WA 98154
`206.624.3600
`
`

`

`Case 2:21-cv-00563-JCC Document 37 Filed 07/26/21 Page 3 of 33
`
`TABLE OF AUTHORITIES
`
`
`
`Page(s)
`
`
`
`Cases
`
`Abbott Labs. v. Adelphia Supply USA,
`2017 WL 5992355 (E.D.N.Y. Aug. 10, 2017) .........................................................................16
`
`Aerotec Int’l, Inc. v. Honeywell Int’l, Inc.,
`836 F.3d 1171 (9th Cir. 2016) ...................................................................................................7
`
`Ashcroft v. Iqbal,
`556 U.S. 662 (2009) ...................................................................................................................6
`
`Bell Atl. Corp. v. Twombly,
`550 U.S. 544 (2007) ...................................................................................................................6
`
`Bio-Rad Labs., Inc. v. 10X Genomics, Inc.,
`483 F. Supp. 3d 38 (D. Mass. 2020) ........................................................................................13
`
`Blue Cross & Blue Shield United of Wisconsin v. Marshfield Clinic,
`65 F.3d 1406 (7th Cir. 1995) ...................................................................................................16
`
`Brooke Grp. Ltd. v. Brown & Williamson Tobacco Corp.,
`509 U.S. 209 (1993) .................................................................................................................14
`
`Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc.,
`429 U.S. 477 (1977) .................................................................................................................11
`
`Dominguez v. UAL Corp.,
`666 F.3d 1359 (D.C. Cir. 2012) ...............................................................................................18
`
`Epic Games, Inc. v. Apple Inc.,
`493 F. Supp. 3d 817 (N.D. Cal. 2020) ...................................................................20, 21, 22, 23
`
`Fed. Trade Comm’n v. Facebook, Inc.,
`2021 WL 2643627 (D.D.C. June 28, 2021) .........................................................................3, 14
`
`Fed. Trade Comm’n v. Qualcomm Inc.,
`969 F.3d 974 (9th Cir. 2020) ...........................................................................................7, 8, 19
`
`Feitelson v. Google Inc.,
`80 F. Supp. 3d 1019 (N.D. Cal. 2015) .....................................................................................18
`
`Free FreeHand Corp. v. Adobe Sys. Inc.,
`852 F. Supp. 2d 1171 (N.D. Cal. 2012) .....................................................................................7
`
`DEFENDANT VALVE CORPORATION’S MOTION TO
`DISMISS - (2:21-CV-00563-JCC) - ii
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`1001 FOURTH AVENUE, SUITE 4500
`SEATTLE, WA 98154
`206.624.3600
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`Case 2:21-cv-00563-JCC Document 37 Filed 07/26/21 Page 4 of 33
`TABLE OF AUTHORITIES
`(continued)
`
`
`
`Page(s)
`
`GMA Cover Corp. v. Saab Barracuda LLC,
`2012 WL 642739 (E.D. Mich. Feb. 8, 2012) ...........................................................................16
`
`Harrison Aire, Inc. v. Aerostar Int’l, Inc.,
`423 F.3d 374 (3d Cir. 2005).....................................................................................................16
`
`Hicks v. PGA Tour, Inc.,
`897 F.3d 1109 (9th Cir. 2018) .............................................................................................6, 19
`
`In re IBM Peripheral EDP Devices Antitrust Litig.,
`481 F. Supp. 965 (N.D. Cal. 1979) ..........................................................................................16
`
`Insulate SB, Inc. v. Advanced Finishing Sys., Inc.,
`797 F.3d 538 (8th Cir. 2015) .....................................................................................................6
`
`Intel Corp. v. Fortress Inv. Grp. LLC,
`2021 WL 51727 (N.D. Cal. Jan. 6, 2021) ................................................................................13
`
`In re Intuniv Antitrust Litig.,
`496 F. Supp. 3d 639 (D. Mass. 2020) ......................................................................................17
`
`Jefferson Parish Hospital District No. 2 v. Hyde,
`466 U.S. 2 (1984) .....................................................................................................................22
`
`Kartell v. Blue Shield of Mass.,
`749 F.2d 922 (1st Cir. 1984) ....................................................................................................11
`
`Leegin Creative Leather Prods. v. PSKS, Inc.,
`551 U.S. 877 (2007) .................................................................................................................11
`
`Lubic v. Fid. Nat. Fin., Inc.,
`2009 WL 2160777 (W.D. Wash. July 20, 2009) .....................................................................24
`
`Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp.,
`475 U.S. 574 (1986) .................................................................................................................10
`
`Metronet Servs. Corp. v. Qwest Corp.,
`2001 WL 765167 (W.D. Wash. Apr. 16, 2001) .......................................................................17
`
`In re Musical Instruments and Equipment Antitrust Litig.,
`798 F.3d 1186 (9th Cir. 2015) .................................................................................................10
`
`In re NCAA I-A Walk-On Football Players Litig.,
`2006 WL 1207915 (W.D. Wash. May 3, 2006).......................................................................12
`
`DEFENDANT VALVE CORPORATION’S MOTION TO
`DISMISS - (2:21-CV-00563-JCC) - iii
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`SEATTLE, WA 98154
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`Case 2:21-cv-00563-JCC Document 37 Filed 07/26/21 Page 5 of 33
`TABLE OF AUTHORITIES
`(continued)
`
`
`
`Page(s)
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`Newcal Indus., Inc. v. Ikon Off. Sol.,
`513 F.3d 1038 (9th Cir. 2008) .................................................................................................20
`
`Northstar Fin. Advisors Inc. v. Schwab Invs.,
`779 F.3d 1036 (9th Cir. 2015) ...................................................................................................7
`
`Ocean State Physicians Health Plan, Inc. v. Blue Cross & Blue Shield of R.I.,
`883 F.2d 1101 (1st Cir. 1989) ..............................................................................................2, 11
`
`Olympia Equip. Leasing Co. v. W. Union Tel. Co.,
`797 F.2d 370 (7th Cir. 1986) .................................................................................................8, 9
`
`PBTM LLC v. Football Nw., LLC,
`2021 WL 37648 (W.D. Wash. Jan. 5, 2021)............................................................................24
`
`Pool Water Products v. Olin Corp.,
`258 F.3d 1024 (9th Cir. 2001) .................................................................................................12
`
`Power Analytics Corp. v. Operation Tech., Inc.,
`820 F. App’x 1005 (Fed. Cir. 2020) ........................................................................................18
`
`Principe v. McDonald’s Corp.,
`631 F.2d 303 (4th Cir. 1980) ...................................................................................................21
`
`Rebel Oil Co., Inc. v. Atl. Richfield Co.,
`51 F.3d 1421 (9th Cir. 1995) ...................................................................................................12
`
`Rick-Mik Enterprises, Inc. v. Equilon Enterprises LLC,
`532 F.3d 963 (9th Cir. 2008) .............................................................................................21, 22
`
`Somers v. Apple, Inc.,
`729 F.3d 953 (9th Cir. 2013) .................................................................................12, 15, 16, 19
`
`Subsolutions Inc. v. Doctor’s Assocs., Inc.,
`2001 WL 1860382 (D. Conn. Apr. 6, 2001) ............................................................................23
`
`Top Rank, Inc. v. Haymon,
`2015 WL 9948936 (C.D. Cal. Oct. 16, 2015) ..........................................................................13
`
`United States v. Microsoft Corp.,
`147 F.3d 935 (D.C. Cir. 1998) .....................................................................................20, 21, 22
`
`United States v. Microsoft Corp.,
`253 F.3d 34 (D.C. Cir. 2001) ...................................................................................................23
`
`DEFENDANT VALVE CORPORATION’S MOTION TO
`DISMISS - (2:21-CV-00563-JCC) - iv
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`FOX ROTHSCHILD LLP
`1001 FOURTH AVENUE, SUITE 4500
`SEATTLE, WA 98154
`206.624.3600
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`Case 2:21-cv-00563-JCC Document 37 Filed 07/26/21 Page 6 of 33
`TABLE OF AUTHORITIES
`(continued)
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`Will v. Comprehensive Accounting Corp.,
`776 F.2d 665 (7th Cir. 1985) ...................................................................................................21
`
`
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`Page(s)
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`Statutes
`
`RCW 19.86.920 .............................................................................................................................24
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`DEFENDANT VALVE CORPORATION’S MOTION TO
`DISMISS - (2:21-CV-00563-JCC) - v
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`FOX ROTHSCHILD LLP
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`SEATTLE, WA 98154
`206.624.3600
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`Case 2:21-cv-00563-JCC Document 37 Filed 07/26/21 Page 7 of 33
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`
`
`I.
`
`INTRODUCTION
`On June 23, 2021, Valve moved to compel the seven individual Plaintiffs to arbitrate
`their claims as agreed in the Steam Subscriber Agreement, and to stay the claims of Wolfire
`Games, the sole game-developer Plaintiff, until the arbitration concludes. Dkt. # 35. Since Rule
`12 motions are now due, Valve moves under Rule 12(b)(6) to dismiss Wolfire Games’ claims
`because they do not state claims upon which relief can be granted under the antitrust laws or the
`Washington CPA. But the Court need not consider this motion now if it stays Wolfire’s claims.
`If the Court decides to consider Wolfire Games’ claims now, it should dismiss them
`because the Consolidated Amended Complaint (“CAC”) (Dkt. # 34) fails to allege the most basic
`elements of an antitrust case, or a Consumer Protection Act (“CPA”) case based on the same
`alleged conduct.
`First, Plaintiffs fail to allege anything unlawful about Valve’s “Steam Keys” program.
`Steam Keys are code numbers that allow Steam-enabled games to be used on Steam even if they
`were bought somewhere else. Valve gives Steam Keys to developers for free. Developers can
`then sell them at retail stores or online to gamers who, for example, see a game on a store shelf
`or on another online game store and want to buy it. The gamer buys the Steam Key from the
`developer, logs into Steam, enters the code, and downloads and plays the game on Steam using
`Valve’s infrastructure just as if the game was purchased on Steam—all without anyone paying
`Valve anything. Plaintiffs allege Valve’s Steam Key Rules and Guidelines violate the antitrust
`laws because they ask developers who want to take advantage of Steam’s features and popularity
`for free to treat Steam customers fairly by setting their prices for Steam-enabled games on Steam
`as low as they charge for those same games when sold elsewhere using Steam Keys. Plaintiffs
`say this request is anticompetitive. But Valve has no duty under antitrust law to allow
`developers to use free Steam Keys to undersell prices for the games they sell on Steam—or to
`provide Steam Keys at all.
`Second, Plaintiffs claim Valve imposes the same pricing requirement—which they dub a
`“Platform-Most-Favored-Nations Clause or “PMFN”—on non-Steam-enabled games developers
`FOX ROTHSCHILD LLP
`DEFENDANT VALVE CORPORATION’S MOTION TO
`DISMISS - (2:21-CV-00563-JCC) - 1
`1001 FOURTH AVENUE, SUITE 4500
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`Case 2:21-cv-00563-JCC Document 37 Filed 07/26/21 Page 8 of 33
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`sell in stores or websites without using Steam Keys. But the only factual allegation that Valve
`ever did this consists of a single anecdote of Valve allegedly telling one unnamed developer it
`shouldn’t give a non-Steam-enabled game free on Discord’s competing platform if it charges
`Steam users $5 for the Steam-enabled version of that game on Steam. CAC ¶¶ 193, 246. The
`remaining allegations merely point to developers setting the same prices for a few games on
`multiple platforms, id. ¶ 209, when games (or any product) selling for the same price at multiple
`stores is commonplace, id. ¶¶ 207, 208, 212. Plaintiffs fail to plead any facts that Valve was
`involved in those pricing decisions. And Valve’s alleged PMFN asks developers to give Steam
`customers the lowest available price for a game. Seeking the best price for your customers is not
`harm to competition; it is competition. See, e.g., Ocean State Physicians Health Plan, Inc. v.
`Blue Cross & Blue Shield of R.I., 883 F.2d 1101, 1113 (1st Cir. 1989) (upholding Blue Cross’s
`“Prudent Buyer” policy under which it paid lowest price physicians charged any insurer).
`Third, Wolfire claims injury from paying Valve an allegedly supracompetitive 30%
`commission on games it sold to consumers on Steam. But it alleges no facts from which the
`Court could plausibly infer that Valve’s 30% commission (reduced at larger sales volumes) is
`above the competitive level. This dooms the CAC. On the contrary, Valve, an innovator that
`created Steam as a platform for playing video games in 2003 and, to create an integrated
`customer experience, offered games for purchase starting in 2004, CAC ¶¶ 51, 54, set the 30%
`rate at the beginning, at a time of “vibrant competition” for PC digital game distribution, id. ¶ 46.
`In other words, 30% was a competitive price from the beginning, was still so nearly a decade
`later in 2013, when Steam allegedly became “dominant,” id. ¶ 97, and nothing is alleged to have
`happened since then to make it supracompetitive. Plaintiffs can muster only a generalization that
`economics predicts Valve’s 30% commission should have decreased over time. Id. ¶ 55. But
`they allege no facts from which the Court could plausibly infer that Valve’s commission is
`supracompetitive. In fact, 30% has become the “industry standard,” id. ¶ 282, while Valve has
`faced competition from some of the largest companies in the industry, including Microsoft, Epic
`
`DEFENDANT VALVE CORPORATION’S MOTION TO
`DISMISS - (2:21-CV-00563-JCC) - 2
`
`
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`FOX ROTHSCHILD LLP
`1001 FOURTH AVENUE, SUITE 4500
`SEATTLE, WA 98154
`206.624.3600
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`Games, and Amazon (“one of the biggest challenges yet to Steam”), id. ¶¶, 249–51, 252, 252
`n.116, 259 n.126. A competitive price does not cause antitrust injury.
`Fourth, Plaintiffs fail to define a facially sustainable antitrust market—the area in which
`the product at issue effectively competes—a threshold step in any antitrust case. They allege that
`Valve unlawfully tied game sales to its PC gaming platform, or used its supposed monopoly (or
`attempted monopoly) in PC gaming platforms to stifle competition in game sales, but those
`theories apply only if games and the platforms on which they are played are separate products
`that compete in separate markets. In fact, they are elements of a single, integrated product or
`service (Steam) that competes in a single market.
`Plaintiffs saw this coming and pled alternatively in their Fifth and Sixth claims that
`Steam, viewed as an “integrated whole,” id. ¶ 133, competes in a single market for gaming
`platforms that include game sales and playing, but say Valve monopolized or attempted to
`monopolize that single market. Putting aside the success stories of competitors, id. ¶¶ 237 n.98,
`242 n.104, 259 n.126, those counts fail to state a claim because, like all of the others, they fail to
`allege antitrust injury (that Valve’s 30% commission is supracompetitive) or that Valve engaged
`in unlawful conduct with Steam Keys or caused harm to competition by allegedly enforcing the
`same pricing policy (the alleged PMFN) against one developer for a non-Steam-enabled game.
`Finally, Plaintiffs’ allegations of Steam’s 75% market share are devoid of any factual
`support, which alone justifies dismissal. See Fed. Trade Comm’n v. Facebook, Inc., 2021 WL
`2643627, at *2, *13–14 (D.D.C. June 28, 2021). Hence no market power, essential to their
`claims.
`These fundamental defects in Plaintiffs’ complaint warrant dismissal.
`STATEMENT OF FACTS
`Valve develops and distributes video games and content for use on PCs. CAC ¶ 23.
`Valve also operates Steam, id., an integrated, online gaming platform that includes (1) an online
`store, where users can purchase, among other things, video games to play on the platform, and
`
`II.
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`DEFENDANT VALVE CORPORATION’S MOTION TO
`DISMISS - (2:21-CV-00563-JCC) - 3
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`1001 FOURTH AVENUE, SUITE 4500
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`Case 2:21-cv-00563-JCC Document 37 Filed 07/26/21 Page 10 of 33
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`(2) features game players value such as matching them with other persons wanting to play,
`tracking achievements, communicating with others through chat and social networking, updating
`games, and maintaining a library to store games. CAC ¶¶ 80, 94, 101.
`Third-party game developers—not Valve—produce the overwhelming majority of games
`customers buy and play on Steam. CAC ¶¶ 5, 15, 54. Game developers set their own prices and
`discounts on Steam. CAC ¶ 212. Valve sells their games to players on Steam at these prices and
`sends developers the revenue, less Valve’s commission, sales tax, and refunds.
`In operating Steam, Valve competes with other companies’ gaming platforms where
`users can buy and play games, communicate with each other, store their games, and use
`additional features. Gamers are able to choose from the “multiple PC Desktop Gaming
`Platforms available, including Steam, E[lectronic] A[rts] Origin, Epic Games Store, and Ubisoft
`Connect,” CAC ¶¶ 69, 118, 235–39, 254–62, along with Itch.io, CAC ¶ 108 n.33, CD Projekt’s
`GOG.com, CAC ¶ 212, Discord’s vertically integrated platform, CAC ¶ 242, Microsoft’s store
`platform, CAC ¶¶ 249–51, Amazon’s platform, CAC ¶ 252 n.116 (now called Prime Gaming,
`https://gaming.amazon.com), and Activision Blizzard’s platform, CAC ¶ 295 n.170.
`Since launching Steam in 2003, CAC ¶ 49, Valve has offered it to game players for free.
`Plaintiffs disingenuously omit this fact, which the Court must glean from their allegations of
`what Valve does charge for—selling games on Steam. Valve earns revenue to pay for Steam—
`for the servers and other infrastructure all over the world to enable players to access their Steam
`accounts to buy and play games, for customer service agents, for employees who add features to
`make it more popular with customers and developers, and other Steam expenses—by charging a
`commission when game developers sell games to players on Steam. CAC ¶¶ 12 n.5, 122–23.
`Valve charges game developers 30% of the game’s price (except 0% for those sold via
`Steam Keys), but games that sell over $10 million pay only 25% and games that reach $50
`million pay only 20%. CAC ¶ 6 n.3. Once again, Plaintiffs disingenuously paper over these
`substantial volume reductions Valve made in 2018, alleging that Valve charges 30% for “nearly
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`DEFENDANT VALVE CORPORATION’S MOTION TO
`DISMISS - (2:21-CV-00563-JCC) - 4
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`FOX ROTHSCHILD LLP
`1001 FOURTH AVENUE, SUITE 4500
`SEATTLE, WA 98154
`206.624.3600
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`Case 2:21-cv-00563-JCC Document 37 Filed 07/26/21 Page 11 of 33
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`all” the games it sells on Steam, CAC ¶ 55, and belittling them as “facial changes … that are not
`real changes at all … just prettied up by some PR.” CAC ¶ 293. Yet games that sell more than
`$10 million or $50 million generate enormous revenue and reducing commissions on that
`revenue is hardly a “facial change[] … prettied up by some PR.” But it makes no difference for
`this motion, so Valve proceeds as if Plaintiffs’ characterization were true.
`Plaintiffs denigrate Valve as a “middleman between publishers and gamers,” CAC ¶ 18,
`that “devotes only a small percentage of its revenue to maintaining and improving the Steam
`Store,” CAC ¶ 19. But again, Plaintiffs fail to inform the Court that Valve offers Steam for free,
`and earns the revenue it takes to operate the platform from selling games on Steam. And the
`CAC makes clear that the Steam platform is far more than a middleman, but offers real value to
`gamers and developers. CAC ¶¶ 83, 112. Indeed, gamers allegedly prize Steam so much that
`Epic’s offering popular games exclusively on its Epic Games Store platform “caused backlash”
`and “calls for boycotts” from gamers forced to “wait for a Steam-enabled release or use a PC
`Desktop Gaming Platform they do not prefer.” CAC ¶¶ 86, 260. An angry user called Epic’s
`action in buying exclusive rights to Borderlands 3 “very anti consumer.” CAC ¶ 86. Gamers
`“want to use the PC Desktop Gaming Platform of their choice.” CAC ¶ 85.
`Plaintiffs concede that Steam was born of innovation and spunk in a vigorously
`competitive market. In 2004, Valve developed a “blockbuster hit” game—Half-Life 2—and
`decided to sell it on, and enable it to be played only on, its year-old Steam platform. CAC ¶¶
`51–52. This decision, made at a time of “vibrant competition” between digital game distributors,
`CAC ¶ 46, caused Steam to grow “and ultimately provided Valve with a massive incumbency
`advantage ….” CAC ¶ 53. But Steam did not become “dominant” until 2013. CAC ¶ 97.
`Valve charged its 30% commission—now the industry standard, CAC ¶ 282—from Steam’s
`beginning when it had zero market share, and hence no power to charge anything but a
`competitive price, and maintained it until reducing it in 2018 for high-selling games. CAC ¶ 6
`n.3. These facts lay out the opposite of a supracompetitive commission.
`
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`DEFENDANT VALVE CORPORATION’S MOTION TO
`DISMISS - (2:21-CV-00563-JCC) - 5
`
`
`
`FOX ROTHSCHILD LLP
`1001 FOURTH AVENUE, SUITE 4500
`SEATTLE, WA 98154
`206.624.3600
`
`

`

`Case 2:21-cv-00563-JCC Document 37 Filed 07/26/21 Page 12 of 33
`
`
`III. ARGUMENT
`A.
`Legal Standard
`“To survive a motion to dismiss, a complaint must contain sufficient factual matter,
`accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556
`U.S. 662, 678 (2009) (quotation marks omitted). “A claim has facial plausibility when the
`plaintiff pleads factual content that allows the court to draw the reasonable inference that the
`defendant is liable for the misconduct alleged.” Id. “Where a complaint pleads facts that are
`merely consistent with a defendant’s liability, it stops short of the line between possibility and
`plausibility of entitlement to relief.” Id. (quotation marks omitted). “Applying this standard is a
`context-specific task that requires drawing on judicial experience and common sense.” Hicks v.
`PGA Tour, Inc., 897 F.3d 1109, 1117 (9th Cir. 2018) (quotation marks omitted).
`This is especially true in antitrust. “[I]t is one thing to be cautious before dismissing an
`antitrust complaint in advance of discovery, but quite another to forget that proceeding to
`antitrust discovery can be expensive.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 558 (2007)
`(citation omitted). Consequently, “the federal courts have been reasonably aggressive in
`weeding out meritless antitrust claims at the pleading stage ….” Insulate SB, Inc. v. Advanced
`Finishing Sys., Inc., 797 F.3d 538, 543 (8th Cir. 2015) (quotation marks omitted).
`B.
`Plaintiffs Fail to Allege That Valve’s Conduct in its Free Steam Keys
`Program Violates the Antitrust Laws.
`
`Plaintiffs claim Valve uses Steam Keys to stifle competition in their alleged PC Desktop
`Game Distribution and Gaming Platform markets. CAC ¶ 146. But Plaintiffs allege no unlawful
`conduct in Valve’s creation and granting of Steam Keys to developers. On the contrary, Steam
`Keys are a free accommodation to game developers enabling them to supply Steam access with
`games they sell or give away outside of Steam, and pay nothing to Valve. Valve has no
`obligation to distribute Steam Keys, let alone to allow developers to use Steam Keys to undercut
`their Steam prices in other stores. Valve’s guideline that developers offer customers buying their
`games on Steam as good a price as offered elsewhere via Steam Keys prevents developers from
`FOX ROTHSCHILD LLP
`DEFENDANT VALVE CORPORATION’S MOTION TO
`DISMISS - (2:21-CV-00563-JCC) - 6
`1001 FOURTH AVENUE, SUITE 4500
`SEATTLE, WA 98154
`206.624.3600
`
`
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`Case 2:21-cv-00563-JCC Document 37 Filed 07/26/21 Page 13 of 33
`
`
`free-riding on Valve’s investment in Steam. The antitrust laws impose no obligation on Valve to
`facilitate competition with itself. “‘Competitors are not required to engage in a lovefest.’” Fed.
`Trade Comm’n v. Qualcomm Inc., 969 F.3d 974, 993 (9th Cir. 2020) (quoting Aerotec Int’l, Inc.
`v. Honeywell Int’l, Inc., 836 F.3d 1171, 1184 (9th Cir. 2016)); see also Free FreeHand Corp. v.
`Adobe Sys. Inc., 852 F. Supp. 2d 1171, 1184 (N.D. Cal. 2012) (defendant “has no duty to license
`its technology to foster competition or to give away its technology for others to clone”).
`As Valve’s website explains, “Steam keys are meant to be a convenient tool for game
`developers to sell their game on other stores and at retail. Steam keys are free and can be
`activated by customers on Steam to grant a license to a product.”
`https://partner.steamgames.com/doc/features/keys (cited at CAC ¶ 12 n.5) (emphasis added).1
`When a gamer activates a Steam Key on Steam, “Valve provides the same free bandwidth and
`services to customers activating a Steam key that it provides to customers buying a license on
`Steam.” Id.2 Steam Keys enable developers, outside Steam, to deliver their games along with
`Steam services to their customers and pay Valve nothing. That gives developers a free way to
`sell (or give away) a reasonable number of copies of their Steam-enabled games.
`Plaintiffs nevertheless try to paint Steam Keys as a means for Valve to keep its alleged
`monopolies in PC gaming platforms and game distribution—through a PMFN. CAC ¶¶ 184,
`198–200. Plaintiffs claim Valve “controls the distribution of any Steam-enabled games outside
`of the Steam Store through the ‘Steam Keys’ program,” CAC ¶ 163, by limiting the number of
`Steam Keys and requiring developers to sell games on Steam as cheaply as elsewhere, id. ¶ 164.
`But consider how Steam Keys work. A developer might request a few thousand free
`
`
`1
`The Court may “consider documents whose contents are alleged in a complaint and
`whose authenticity no party questions, but which are not physically attached to the [plaintiff’s]
`pleading.” Northstar Fin. Advisors Inc. v. Schwab Invs., 779 F.3d 1036, 1043 (9th Cir. 2015)
`(brackets in original) (quotations and citation omitted).
`2
`While Plaintiffs allege that Valve is “tying the Steam Gaming Platform to the Steam
`Store,” CAC ¶ 341, that claim is inconsistent with their admission that Steam Keys “provide[] an
`additional alternative to game publishers for selling Steam-enabled games,” id. ¶ 145 (emphasis
`added)—an alternative that doesn’t require any purchase on Steam at all.
`DEFENDANT VALVE CORPORATION’S MOTION TO
`DISMISS - (2:21-CV-00563-JCC) - 7
`
`FOX ROTHSCHILD LLP
`1001 FOURTH AVENUE, SUITE 4500
`SEATTLE, WA 98154
`206.624.3600
`
`
`
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`Case 2:21-cv-00563-JCC Document 37 Filed 07/26/21 Page 14 of 33
`
`
`Steam Keys and pack them in retail boxes. A gamer may buy the game in a retail store. The box
`would contain only a Steam Key card with code numbers to let the gamer download and play the
`game on Steam. The developer gets an opportunity to sell Steam-enabled games in, say, brick-
`and-mortar stores or its own online store, or give free copies to reviewers, yet pay Valve nothing.
`Plaintiffs’ allegations that Valve’s Steam Key rules amount to an unlawful PMFN fail for
`the straightforward reason that Valve, which created and owns Steam, has no duty under the
`antitr

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