The legislative body of the European Union is launching an antitrust investigation into regional pricing and geo-blocking practices on Valve's Steam store. In a statement, the European Commission says it's investigating "bilateral agreements" between Valve and five publishers: Bandai Namco, Capcom, Focus Home, Koch Media and ZeniMax.
The investigation is focused on activation keys, whose primary function is as an anti-piracy tool. After buying a physical copy of a game, users need to submit an activation key to prove they own it and add it to their Steam library. Once done, the game is then available on any device that the user is logged into.
Although that's an accurate description of what activation keys are supposed to be for, in reality, they serve another, arguably damaging purpose: enabling a giant third-party market. Companies like G2A and Kinguin resell activation keys at discounted rates, which is great for getting games on the cheap but not so great for keeping smaller developers in business.
While games bought directly through Steam are almost entirely region-free, the same cannot be said for activation keys. The Commission believes that Valve has agreements with the five publishers that may require the use of activation keys "for the purpose of geo-blocking." The example it gives in its statement is that a key bought in certain countries (it lists the Czech Republic and Poland) may only work within those countries. These regional restrictions are made clear on the Steam Support site.
The European Union, although a single market, contains diverse economies and currencies, with GDP per capita varying from around $95,000 down to $7,000, depending on the country. As such, video game publishers price their retail games differently in, for example, the UK and the Czech Republic. While this makes business sense, by geo-blocking these games publishers may be breaking EU competition rules, as they're preventing parallel trade within the single market.
Valve, for its part, is being investigated for facilitating that rule-breaking. There is no indication that the Steam store itself is in any trouble, as geo-blocked games are rare there, and Valve makes it easy for users to change their location to look at different prices.
The five publishers, for the uninitiated, are all big names in video games. ZeniMax owns Bethesda, Arkane, id, and other developers, typically publishing under the Bethesda brand. Capcom develops series like Street Fighter, Resident Evil and Dead Rising. Bandai Namco was a huge name in arcade gaming, and currently publishes the Dark Souls games internationally. Focus Home is mostly focused on publishing indie titles regionally, while Koch Media owns Deep Silver, which develops its own games as well as handling regional distribution for companies like Atlus (its big release for 2017 will be Persona 5).
At the time of writing, none of the companies involved have commented on the investigation, but we'll update this article once they do.