InCompetition - Sony takes the L for misrepresenting gamers rights

Sony “takes the L” for misrepresenting gamers’ rights

Published On 12/06/2020 | By Daniel Gray | Consumer protection, Enforcement

Sony Interactive Entertainment Network Europe Limited (Sony) has been pwned for misleading Australian consumers about their legal rights after they faced difficulties downloading or playing games purchased on the PlayStation Network.

The Federal Court of Australia ordered Sony to pay a $3.5 million penalty and $100,000 towards the ACCC’s legal costs after Sony admitted that it breached the Australian Consumer Law (ACL) by engaging in misleading or deceptive conduct and/or making false or misleading representations about consumer guarantees.

The breaches occurred when customers who had purchased games online through the PlayStation Store called Sony customer service representatives (based in Scotland) after encountering difficulties downloading or playing the games. On multiple occasions, a representative told a customer that Sony did not have to refund games if more than 14 days had passed since the game was purchased or if it had been downloaded (on the basis that downloaded games were not removable from the console and could therefore not be “returned”).

Other representatives told different consumers that refunds had to be authorised by the game developers and were payable in PlayStation’s virtual currency instead of money or other forms of ‘tender’ useable outside the PlayStation Network.

In addition to the misrepresentations made to consumers by customer service representatives, Sony was found to have misled consumers as to their rights under the ACL in its Terms of Service.  The Terms – which Sony had in place between October 2017 and May 2019 – implied that PlayStation Network users did not have guarantees as to the quality and performance of games purchased digitally.

A final breach was found in respect of statements that Sony made about consumers’ rights to refunds when they added funds to their virtual wallets, which are used to purchase games online from the PlayStation Store.  The statements represented that users could not obtain a refund of these funds once they had been added. In cases where consumers had insufficient funds in their virtual wallets and needed to ‘top up’ to purchase a game, Sony also misrepresented to consumers that they could not cancel, or otherwise obtain a refund, for their purchase.

The Court found that Sony’s representations did not accurately describe the PlayStation users’ rights under the ACL, which provides consumers with guarantees that purchased goods are of acceptable quality, fit for their disclosed purpose and correspond to their description.  Purchasers of goods that do not comply with these guarantees are entitled to seek redress from the supplier, including a refund where there is a “major failure”.  Suppliers of goods cannot exclude liability for breaches of these guarantees (e.g. through their Terms of Service) and the guarantees are not subject to the limits described by Sony’s customer service representatives.

Sony “stung”

Sony’s misrepresentations were made at times both before and after 1 September 2018, when the maximum penalty for a single contravention of the relevant ACL provisions increased from $1.1 million to the greater of $10,000,000 or 10% of the company’s annual turnover.  Regardless, Sony and the ACCC agreed that a $3.5 million penalty was an appropriate total penalty for the breaches.

Justice Steward of the Federal Court acknowledged that the agreement was ‘most likely the product of “compromise and pragmatism”’, but ultimately accepted that the agreed penalty was appropriate and carried a “sufficient sting” to deter Sony and others from contravening the ACL in the future without being oppressive, given Sony’s strong financial position.  The penalty also accounted for Sony’s co-operation with the ACCC in resolving the proceedings and undertaking efforts to prevent similar breaches in the future by updating the Terms of Service and by preventing the making of the representations when consumers added virtual funds and consulted PlayStation customer service representatives.

ACCC screens gamers

Aggrieved gamers seeking console-ation for glitchy games have found a willing ally in the ACCC, which has set up several “boss fights” with companies aiming to dodge their obligations under the ACL.  Its case against Valve Corporation, the US-incorporated operator of online gaming platform Steam, led to a $3 million penalty, despite attempted appeals all the way to the High Court.  There – as in Sony’s situation – the fact that the contravener was incorporated in a foreign country did not exclude application of the ACL’s prohibitions on false or misleading representations, which apply to representations made to Australian consumers by corporations “carrying on business in Australia”.

Just over a week ago, the ACCC accepted a court-enforceable undertaking from Electronics Boutique Australia Pty Ltd (trading as EB Games) that the retailer would refund customers who experienced faults in the ‘Fallout 76’ game purchased between November 2018 and October 2019.  EB Games had originally told these customers that they were not entitled to refunds, which it acknowledged was likely to have constituted the making of false or misleading representations in breach of the ACL.

On 1 November 2019, the ACCC accepted an identical court-enforceable undertaking from three related video gaming companies operating as ZeniMax in respect of refunds for faulty versions of the ‘Fallout 76’ game, which was published by a company within the ZeniMax Media Inc. corporate group.

Although the size of the penalty ordered against Sony is unlikely to signify Game Over for the entertainment giant, the ACCC will be hoping that it makes suppliers think twice about treating consumers like n00bs when it comes to their rights under the ACL.

Image credit: By $ir$terlin – Own work at Wikimedia Commons / CC BY-SA 4.0 / Remixed to B&W and resized

About The Author

is a graduate in the competition litigation team in the Sydney office of King & Wood Mallesons.

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