OT: EA Antitrust Lawsuit
Just received the following from EA.
Plaintiffs' argument (or what I can infer about it) strikes me as pretty damn frivolous.
GEOFFREY PECOVER and ANDREW OWENS v. ELECTRONIC ARTS INC.
U.S. District Court (N.D. Cal. - Oakland Div.)
Case No. 08-cv-02820 CWIf You Purchased Certain Electronic Arts Brand Football Video Games
Between January 1, 2005 to the Present
You May Be a Class Member.
Membership as a class member in the Electronic Arts Litigation is the result of a lawsuit filed in the U.S. District Court, Northern District of California, Oakland Division (Case No. 08-cv-02820 CW).
What Is This Class Action About?
The class action lawsuit alleges violations of California's antitrust and consumer protection laws in connection with the sale of certain football video games. Plaintiffs, purchasers of Electronic Arts' football video games, claim that Defendant Electronic Arts entered into a series of exclusive licenses with the National Football League (NFL), National Football League Players' Association (NFLPA), National Collegiate Athletics Association (NCAA), and Arena Football League (AFL), which Plaintiffs claim foreclosed competition in an alleged football video game market. Plaintiffs allege that this series of exclusive licenses caused customers who purchased certain football video games to be overcharged.
Defendant Electronic Arts has denied any liability and all allegations of misconduct. The Court has not decided whether the Defendants did anything wrong, and this Notice is not an expression of any opinion by the Court about the merits of any of the claims or defenses asserted by any party to this litigation.
Who Are Class Members?
The Class includes all persons who, during the period January 1, 2005 to the present, purchased the Madden NFL, NCAA Football, or Arena Football League brand video games published by Electronic Arts with a release date of January 1, 2005 to the present. Excluded from the class are purchasers of software for mobile devices, persons purchasing directly from Electronic Arts, persons purchasing used copies of the relevant football video games, and Electronic Arts' employees, officers, directors, legal representatives, and wholly or partly owned subsidiaries or affiliated companies.
What Should I Do? (Getting Further Information)
If you believe that you may be a class member (see above "Who Are Class Members"), you should get more detailed information about the class action and its potential effect on you and your rights. Further information can be obtained by going to the following website: www.easportslitigation.com. Additional information about the lawsuit may be obtained from Plaintiffs' Counsel website at www.hbsslaw.com, or by calling Plaintiffs' Counsel at 1-206-623-7292.
To Remain a Class Member
If you are a class member and you do nothing, you will be bound by the court's rulings in the lawsuit, including any final Settlement or Judgment.
To Exclude Yourself from the Class
(Deadline to Request Exclusion: June 25, 2011)
If you are a class member and you want to exclude yourself from the class and keep your right to sue Defendant, you must take further action before June 25, 2011. By that date, you must request exclusion in writing to this address:
Electronic Arts Litigation Exclusion
P.O. Box 8090
San Rafael CA 94912-8090Or submit a request for exclusion electronically at the following website: www.easportslitigation.com
For further information about excluding yourself from the class go to the following website:
www.easportslitigation.comPlease do not telephone or address inquiries to the Court.
April 6, 2011. By Order of the U.S. District Court (N.D. Cal. - Oakland Div.).
They signed exclusivity deals after NFL 2k5 dominated the market. I think that falls under the definition of substantially lessening competition.
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This would be wonderful if EA had some competition. Even cooler if it happened before I stop playing video games.
I still have NFL 2k5 as well as Madden 10, guess which one I play more.
It's suprisingly detailed and it doesn't require specialist-level preparation from all players.
some games are just awful by ea, yet they have some nice recent innovations including the be a pro modes.
Ultimate team for me at least is just an amazing way to kill hours and hours
My last two years at Michigan were largely dedicated to FIFA. That and ultimate frisbee. It only got more intense around the World Cup. Good times when you get done with everything in April and have a four-month summer.
2K sports MLB games have always been terrible compared to EA Sports, hopefully this will allow EA to start competing in baseball again.
the NFL has to be so pissed they lost their bid for an antitrust exemption in front of the Supreme Court last year.
Yep, got a couple of those e-mails today.
I really hope they stop half-assing these games and actually try to fix some of the problems instead of releasing the same game every year with a new terrible feature that they released years ago but decided to rename.
This could help as EA is clearly monoplizing the market. I'm just not sure if there is enough national authority in the football gaming market to have a substantial impact, but I hope it does something.
If EA now has to spend a bunch of money defending itself in court, it'll probably cut back on product development, if anything.
Doubt that. EA already half-ass everything and it isn't because they're poor.
that their legal fees in a case like this would be substantial enough to have even a slight impact on their game development budget.
Yes, but it gives them a pretext to not spend any more on game development.
I believe the allegations described in the complaint would constitute a "restraint on trade." The Sherman Act, however, prohibits only agreements which result in an unreasonable restraint on trade.
Some restraints on trade are tolerated: non-compete clauses (agreements not to work for any competitor for a specified period), for example, are routinely enforced despite being clear restraints on trade--provided that they are subject to reasonable time and distance limitations.
The question will likely be not whether the agreement between EA and the licensors constituted a restraint on trade but whether such restraint was unreasonable. As I am not an anti-trust attorney, I cannot say whether EA engaged in any prohibited conduct but there is at least a vague case here.
I'd love 2k Sports to be able to make NFL and NCAA football games again... they were/are way better than EA Sports... hell Madden didn't catch up to NFL 2k5 (graphically speaking) until about 2008.
NBA 2K11 owns NBA Live too, so there's that.
It's about time this started happening. Personally I think Activision is more guilty, but both of the major publishers really need to be put in their place, their business practices in the last 10 years or so have been disgusting.
Does anyone with knowledge of how these things work have any idea if this is a reasonable case? What is the likelihood that I actually see anything come of this?
There is no doubt that there this is a cognizable claim here. The Sherman Act prohibits contracts in restraint of trade and the exclusive contract restrains trade by preventing other game manufacturers from entering into licensing agreements. This is enough to set out a claim under the Sherman Act. That said, I doubt anything meaningful comes out of the case. The claims here are going to be reviewed under what's called the Rule of Reason, which allows the defendants to present an argument as to why the challenged agreement provides added benefit or efficiency. It wont be particularly difficult for the defendants to provide an efficiency story here (something as simple as "its more efficient to negotiate with a centralized seller of rights than to negotiate with each seller individually" could be sufficient, and similar arguments have been accepted in the past). Just to give a sense of the mountain plaintiffs are facing here, a recent study showed that plaintiffs have only won once in something like the past 225 antitrust cases reviewed under the Rule of Reason and which have been carried all the way through appeal.
Of course, the wild card in all of this is the Supreme Court's decision in American Needle, but it's not clear how courts are going to interpret that case at this point. For what it's worth, all American Needle said was that the NFL's exclusive licensing was not per se illegal, and that it had to be reviewed under the Rule of Reason. Given the numbers above, I doubt the defendants are going to struggle here.
The other caveat is that this might settle, but I'm not sure why the defendants would settle here at least until they've lost their motion to dismiss and motion for summary judgment. And even then, I'm not sure what or how much you could reasonably expect to get out of a settlement.
To summarize: There's something here as far as the plaintiffs are concerned. That said, don't hold your breath that you'll actually see anything out of this.
You keep buying the game, so why should they fix it?
Reasoned like a true monopolist.
Not to be a dick but...ah...don't buy the game.
Sorry, maybe I wasn't clear. Yes, the best option is for there to be no monopoly and I would be very very happy with EA losing power in the marketplace (bunch of assholes to work for from what I've heard). But in the case of a existing monopoly, what is forcing you to buy a product that you don't like?
only six?!..lol
2K Sports. You actually have to work for every recruit, 5 stars are F-ing hard to reel in. I'm referring to College Hoops 2K8, which is at least more challenging... I can't imagine they'd make it much easier to recruit if they made a football game.
I would argue that the free market is at work, since the free market includes the ability of producers and suppliers to negotiate their own agreements. In this case, it's EA and the NFL or the NCAA. And EA pays astronomical amounts of money for exclusive NFL rights. IIRC it was something like a billion dollars over ten years. An incredible amount of money.
Just because there isn't competition in production doesn't mean that free market principles were violated. Presumably, the NFL et. all sold their licensing rights to the person who paid them the most. 2K and everyone else got outbid, and that's not EA's problem. If the NFL determined that they could maximize revenue by selling to a single distributor, what's the problem with selling that way? This happens every day (Apple sold exclusive rights to ATT, just off the top of my head).
This is 2K wishing they had put up the capital to buy a franchise that is apparently more successful than they projected it to be, and are using the court system to correct their faulty analysis.
Lost in some of the analysis is the underlying function of anti-trust: consumer protection. The inquiry cannot stop at whether free-market principles prevailed at the distribution phase (or, more accurately, the right-to-manufacture phase), it must continue to the next step: the effect on consumers.
To put in in terms of this case (which will probably be fruitless but I'll do it anyway), although it is significant that several video game manufactures had an equal opportunity to bid on the license, the real question is whether any license (regardless who prevails on the bid) would be unlawful in this context.
As it stands, if a consumer wants to play a video game featuring property protected by those exclusive licenses, he must purchase from EA. Consequently, EA can charge a higher premium than it otherwise could for those games. The net effect of the license might prove to be that each consumer must pay an additional $5 per unit (I have not been presented any evidence, this is hypothetical). At the same time EA is charging a premium for its games, it has less fear of being out-performed by a rival manufacturer of the same product because the agreement prevents truly similar games. So the market can tolerate a lower-quality product from EA.
It's a bit like exclusive territories. Imagine Sprint, Nextel, AT&T, etc. realizing that they can make double the profit by agreeing to divy up the states to which they will provide service. If you live in California and want a cell phone, you would have to go through AT&T, Tennesseans could only use Sprint, etc. By doing this, not only could the respective companies theoretically charge significantly more than what they are now, they could also supply lower-quality service (hard to believe with AT&T, I know). Most would agree this would hurt end-users and technological advancement.
If evidence demonstrates that the EA agreements had a similar effect, perhaps there would be good reason to prohibit those agreements.
tl;dr.
This is too stupidly short to look like a good question, but my economic argument is: who cares?
If people do not want to pay $60 for an EA NFL video game, they won't. In that case, either they will change their product or lose the next bid. Freedom to issue licenses is an essential part of economic freedom, IMO.
Also wanted to add that I realize we're coming at this from two directions: you from a legal/legal theory explanation of the case, and mine an economic assertion that the case should be different.
For one, people who want good products should care. There is a lot of value in software that can display interactive images of NFL players on a television set.
Without robust competition, development of such software can become stagnant leading to worse games than otherwise would have been generated.
If EA put a lot of money up, either they will lose or they will produce a good product. If they produce a product people are unwilling to consume, they will not be able to afford the next license.
I want a good product and have no problem with the NFL (and everyone else) selling an exclusive license voluntarily. It's theirs to sell.
A premise of antitrust is that people are often willing to pay more for less. Some basic game theory suggests that where this is true, a few agreements can yield a climate where people are less inspired to provide the best possible service and still make more money.
Competition is the factor that drives those people to put out the best product/widget/service they can, churning innovation and technical advancement. A long time ago when the Sherman Act was passed, some people thought this would ultimately have a positive effect on quality of life. They were probably right.
I disagree. The Sherman Act unfairly disregards freedom of association, and in my opinion, misses a lot of basic economic tenets.
1) There never has been a natural monopoly, every single business has faced price pressures in the form of direct competition or alternatives discovered.
2) "Monopolize" as it's used in the original act is incredibly vague. If I start a business tomorrow, it's my goal to conquer market share, is it not? The types of "protections" afforded by the Sherman Act (among others) are not necessary economically and are completely arbitrary in terms of enforcement (as in the Microsoft case).
As to game theory and consumer protection, I believe that every choice to buy an EA game was a rational one. In essence, EA bought a product fairly (the license) and sold it fairly on the market. If people willing to buy an "inferior" product, then so be it (with the caveat that it is impossible to prove an "inferior or superior" product without a price mechanism, which shows that EA creates an acceptable game). I tend to believe that people find the EA product an acceptable expense of their $60, and would not buy the game if it was not. Hence, the price pressure on EA to create a good product.
One of the problems is that we could be having this same discussion about an early 20th century automacar: (the following is a bit over-dramatic, but still illustrates the point)
Picture a series of agreements whereby the manufacturer of this vehicle was the only one able to place cars (machinery with four wheels and an engine) on the market. Should that manufacturer decide to spin out millions of this model year after year, people whose only transportation options are a train between two fixed points, a bicycle, and walking would clamor to obtain one. If this was the only car on the market today, you could expect people to pay $30,000 despite the fact it's relatively unsafe, prone to breaking down and can't travel faster than 40 mph. Try not to think about the mpg.
Under those conditions, you could easily point out "hey, people are paying $30,000! It's a good product and if it weren't, people wouldn't buy it!" And you'd be right. The problem is that those agreements would have stifled a century of innovation, design and technical advancement that has greatly benefitted automobile consumers.
See, the problem here is that one cannot claim to "own" something as nonspecific as a design incorporating four wheels and an engine. It is pretty clear who "owns" the likeness to Charles Woodson, and the paper trail shows that he allows the NFL and NFLPA to distribute his likeness.
The argument I'm making is that when someone owns something (or has permission from the owners), they have the right to sell it. The highest bidder can buy it, and as long as they do an efficient job, they will find success. If they do not, they will fail and someone who does a good job will emerge. No free market principles are violated until you force the owners to do something that is not in their best interest (I'm assuming that selling a single license is in their best interest since that's what they did). To summarize, as long as we're talking voluntary action, I'm fine with whatever contract comes up, including a restrictive licensing agreement.
I realize I'm also equating capitalism/free market with "good". This may or may not be the case to you, and I'm not about to try and sell those ideas, as I don't think it's the right forum. Realizing that bias, though, might make my argument more clear.
I agree, I like this discussion and I think we're progressing toward some interesting ideas - superfluous pos-bang for entertaining me.
The idea of stunting innovation aside (which I'm not sure has been directly addressed), it sounds like your qualm isn't with the merits of antitrust, but with how they're employed in this particular case. Specifically, it sounds like you believe the NFL (for example) created a good product, and should be able to profit from that product even at monopolized prices (I have no problem with this prospect by the way).
You're right that the NFL and an automobile are different. Once the automobile has been created, others can use similar materials to create a similar product with their own additions and twists, thereby creating a new, non-protected work. Conversely, atheletes are a limited resource. Once you've taken the best in the world, it's difficult for a competing league to crop up without seeming second-rate (XFL RULEZZ!!).
The question is why should the guy(s) who assembled those atheletes in a league be compensated at a better rate than the guy who invented the automobile?* (As I understand it, you are asserting that one should be rewarded with monopolization rights, but the other shouldn't).
If you're going to permit one trailblazer to profit to the maximum extent possible, why not other trailblazers? If beer were first invented tomorrow, I would be so grateful for the inventor that I would want him to own many small countries. But you have to balance the desire to reward a good product (beer, the automobile, the NFL) against the desire for innovation (sure is nice to open the fridge and see not just Bud Diesel but a hefeweizen, an amber, a dark beer, a light beer etc.)
*To be clear, we're not analyzing whether the NFL should be able to monopolize professional football (by all means, I'm happy that they are) just whether this particular licensing arrangement for video games is "good" or "bad" in vague, undefined terms.
Okay, after a celebratory bender last night, and a logic exam today, I have an answer. It might be less glamourous than you would hope, but it's something.
My answer is that the arguments I was making regarding restrictive licensing were only in the context of our copyright-heavy society. Were there more freedoms of production, and a widespread acceptance of increased notoriety being more profitable than a user fee, I would wholeheartedly agree.
In this specific case, though, I think 2K is using laws that I disagree with to obtain an advantage over EA who has already paid their fees (and made a better business projection), which were presumably bought at auction or some kind of competitive bidding process.
As to stifling competition, I would agree. However, I don't see a "clean" or "neat" alternative presented when user fees can be demanded for replicas. As long as Woodson demands compensation for CB's that are named "Woodson" and fit his general description, I think the status quo (i.e. EA) is the best we're left with. Get rid of those restrictions, and I agree that a restrictive licensing sale is "wrong".
As a preliminary example of why Woodson's best interests would be best served by removing copyright resrictions associated with him, the Grateful Dead are a prime example of an entity that disavowed copyright "protection" and still prospered, arguably more because of their lax attitude. I can also name some economic authors who prospered (as much as non-mainstream economic authors can) by doing the same.
As I'm now confident we're the only two users still reviewing this thread, I'll make a few additional disjointed observations and clarifications (mostly I just want to see how skinny I can make the comment boxes):
- I think I may have been mistaken, perhaps your point of contention is with the merits of antitrust legislation after all (e.g. "2K is using laws that I disagree with"), in which case we should probably have taken a step back from the EA licensing arrangement to engage in a broader discussion of antitrust;
- Technical clarification: 2K is not a party to the action to my knowledge (though as a practical matter I wouldn't be surprised to learn they were footing the bill for legal services);
- I'm not sure how 2K stands to gain an advantage over EA (as opposed to merely attaining equal footing should both companies be permitted to produce NLF-licensed software)--you point out that EA has already paid its licensing fee, but if that agreement fails for want of legality it would be grounds for rescission and EA would be entitled to repayment of its fee;
- I don't have a problem with restrictive (or even exclusive) licensing arrangements(nor does the law per se). I also have no idea if the EA agreement is good or bad, legal or unlawful, beneficial or cancerous--the case is still in the discovery stage and I'm not sure anyone has the answers to those questions yet. But I do see how the agreements could be bad/unlawful/cancerous, so that's the position I have taken for this discourse;
- I agree with you that EA appears to have made a good business decision, just as AT&T, Sprint and Nextel would have made a good business decision had they divied up the states to which they provided service. Antitrust is full of nothing but very, very good business decisions; it doesn't make enforcing them the best course of action. Again, it's too early to tell if EA arrangements fall into the prohibited category;
- I'm not entirely sure what you mean by "user fee." I presume it refers to the consideration EA paid for various licensing rights to the NFL, NCAA, etc.; let me know if I'm mistaken as it may impact my understanding of some of your other points.
- I'm not a copyright, trademark or patent attorney so it's possible my understanding is flawed, but I don't believe Woodson (or another party) can copyright his image. That said, he does have a cognizable property right to his own publicity that can be licensed to third parties. I'm not sure, however, that he would be directly affected by the ruling in this case--it depends on his agreements within the NFL. I'm not even sure how much the NFL would stand to lose (if anything) if it were required to open its contracts to multipe software manufacturers (presumably it could set the fair market value of the license at the price of current EA contract - if EA is the only one willing to pay that price, it would have a de facto exclusive licensing arrangement and the NFL is in the same position; if multiple manufacturers are willing to pay that price (or greater), the NFL would still be in the same (or better) economic position). As a practical matter, the value of the licensing agreement would probably drop a little bit (though there is a chance it would rise if, as you have suggested, 2K subsequently realized the contract price was artificially low). Either way, EA would be probably be hurt, but again I'm not sure whether this would adversely affect particular players. In other words, you mentioned that as long as Woodson demands compensation for his image, the EA model is the best one. But even if the NFL opens the licensing doors to more manufacturers, the price of those licenses would still be comparable, perhaps even the same or greater than they had been under the exclusive agreement. The last thing I would advocate to resolve any dilemma discussed in this thread is to relax property right protections for the players (though if they want to release those rights in an effort to profit a la the Grateful Dead--and have not already licensed those rights out to the NFL--they're more than welcome to). I think property right protections and the current state of antitrust law are not only compatable but collectively beneficial.
I'll go one at a time here:
- Yes, and I assure you that would have been an interesting discussion. When you encounter something you haven't before (and since you're probably safe in the assumption that nobody else is reading this) such as Austrian legal theory (assumption here, I could be wrong, my apologies if that's the case) regarding this type of law, I expect a lawyer would enjoy that.
- My mistake. This is where I get ahead of myself and someone trained to not do so does not. However, I will say that I think it's obvious that someone wants EA to have a nonexclusive agreement, and I can only imagine that a competing company would stand to gain from this more than Madden consumers.
- I had not considered this. I'm a little more in favor of the lawsuit if this is the case, but I still feel the only way to sue (antitrust/Sherman Act) is something I'm not comfortable with, even if the net good might come from an antitrust victory in this particular case. I would have to put more thought into this before I can fully answer.
- Skipping down a few points (you seem to have the important parts correct) I believe Woodson and everyone are paid to have their names used in conjunction with the games. There was a case in 2008 where the retired players were awarded a combined $28,000,000 in a suit where they claimed the NFLPA did not pass on royalties. This was awarded solely on membership, so you're right that an individual is not expressly compensated for their appearance in a game.
- I probably should have left those parts off. A discussion of the entirety of the patent/copyright/trademark system is too much for this skinny text, IMO. Essentially we got to the bottom of it, anyway, where you think it's good and I disagree. Considering your apparent intelligence, I'll assume this is a very informed decision and not bring out the good qualities of another line of thought.
What if you downloaded a torrent? Can those people sue too? j/k
But not really.
and EA loses in court, what do I get? Compensation for each EA Sports game I bought?
In reality, the case will probably settle and you'll get a coupon for $10 off Madden '14.
BTW, you don't need to sign up. You are automatically signed up--unless you choose to exercise your right to "opt-out." Unless you have an extraordinary claim (e.g., you bought 200 copies of Madden '06 and distributed them to inner city kids or something), you probably don't need to do anything but wait for your $0.79 check.