What Just Happened?
Sony, owners and creators of the gaming sensation PlayStation, have been hit with a lawsuit with a possible £5 billion pay out.
What Does This Mean?
9 million claimants are involved in the class action lawsuit alleging that the gaming giant massively overcharged individuals for games and in-game purchases.
The collective claim accuses Sony of ripping off millions by charging 30% commission on every digital and in game purchase made through the PlayStation store. According to the claim filed with the Competition Appeal Tribunal on Friday, anyone living in the UK who has owned a console since 19 August 2016 and either purchased digital games or add-on content on their console or via the PlayStation Store is included in the claim and is potentially entitled to compensation. The estimated damages per individual member of the class is between £67 and £562 excluding interest.
How Does This Affect the Legal Sector?
The legal claim is a class action against the gaming company, brought by consumer rights champion Alex Neill. A collective claim or ‘class action’ is one whereby multiple claimants with cases that share common characteristics bring a claim against the same defendant(s).
The case has been brought to the UK competition appeal tribunal. A specialist tribunal that the government describes as a ‘specialist judicial body with a cross-disciplinary expertise in law, economics, business and accountancy, whose function is to hear and decide cases involving competition or economic regulatory issues.’
Competition law was introduced to manage markets and to ensure that agreements and practices are not used that may distort competition within a market. In this case the partner leading the case, Natasha Pearman of Milberg London said that "Sony dominates the digital distribution of PlayStation games and in-game content; it has deployed an anti-competitive strategy which has resulted in excessive prices to customers that are out of all proportion to the costs of Sony providing its services.”
The action is only possible after the introduction of Schedule 8 of the Consumer Rights Act (CRA) 2015 which created a new collective proceedings regime for damages claims before the Competition Appeals Tribunal ("the CAT").
Under the new regime, members of a class of claimant will be bound by the outcome on either an opt-in or opt-out basis, depending on the nature of the claim. Prior to the introduction of the law claimants could only become a member of an action and receive any damages if they chose to opt-into it. However, after the introduction of the opt-out option, a class action can be pursued on behalf of a number of unnamed or even unidentified claimants, unless they specifically opt-out of the matter.
‘The CAT’s jurisdiction is limited to hearing claims for loss or damage in respect of an infringement or alleged infringement under Articles 101(1) or 102 of the Treaty on the Functioning of the EU or Chapter I or II prohibitions under the Competition Act 1998, that is to say essentially claims arising from (alleged) cartel conduct or an abuse of dominant position. This is not disturbed by the CRA.’
In this case the action accuses the company of a breach of competition law by abusing its market power to impose unfair terms and conditions on game developers and publishers, forcing up prices for consumers.
Although Sony have yet to reply to the action, there has been an increase in claims filed in the CAT in recent months of claims. This has followed a landmark 2020 Supreme Court ruling which ‘allowed a £10bn lawsuit brought by former financial ombudsman Walter Merricks on behalf of 46.2mn people against payments company Mastercard to proceed.’ This shows the versatility and use of the introduction of the opt-out action which can protect and compensate consumers from the implication of a monopoly in the market.
Written By
Gabriella Cinotti
Assessing Firms
#Pinsent Masons#Baker Mackenzie#Dentons#Linklaters LLP#Latham & Watkins LLP#Ashurst#Gowling WLG#Reed Smith#Mayer Brown# Herbert Smith Freehills
This Artice was Written Using the Following Sources:
(1) Shiona McCallum, ‘PlayStation sued for £5bn in the UK over ‘rip-off games’ (BBC News, 22 August 2022) < https://www.bbc.co.uk/news/technology-62631533> Accessed 24 August 2022
(2) Ibid
(3) Megan Baynes, ‘Sony PlayStation being sued for £5bn amid claims it ‘ripped off’ nine million customers’ (Sky News, 22 August 2022) <https://news.sky.com/story/amp/sony-playstation-being-sued-for-5-billion-amid-claims-it-ripped-off-nine-million-consumers-12678949> Accessed 25 August 2022
(4) Ashurst, ‘Collective Actions: UK Guide’ (Ashurst, 20 October 2021) < https://www.ashurst.com/en/news-and-insights/legal-updates/quickguide-collective-actions---uk-guide/> Accessed 25 August 2022
(5) UK Government, ‘Competition Tribunal Appeal’ (UK Government website) < https://www.gov.uk/government/organisations/competition-appeal-tribunal> Accessed 24 August 2022
(6) Alex Hern, ‘Sony could face £5bn in legal claims over PlayStation game charges’ (The Guardian, 22 August 2022) <https://www.theguardian.com/technology/2022/aug/22/sony-could-face-5bn-in-legal-claims-over-playstation-game-charges> Accessed 25 August 2022
(7) Ibid n4
(8) Gibson Dunn, ‘UK Consumer Rights Act Ushers in Class Action-Style Collective Proceedings Regime in the Competition Appeals Tribunal’ (Gibson Dunn, 2 October 2015) < https://www.gibsondunn.com/uk-consumer-rights-act-2015-ushers-in-class-action-style-collective-proceedings-regime-in-the-competition-appeals-tribunal/> Accessed 25 August 2022
(9) Jane Croft, ‘Sony PlayStation faces UK class action lawsuit of up to £5bn’ (Financial Times, 22 August 2022) < https://www.ft.com/content/4f305316-a254-4bd2-a10a-1d87282710ac> Accessed 24 August 2022
Disclaimer: This article (and any information accessed through links in this article) is provided for information purposes only and does not constitute legal advice.