PlayStation credit scheme derails Sony video game monopoly settlement

(CN) — A federal judge for a second time rejected a proposed class action settlement in an antitrust case pitting PlayStation 5 gamers against the popular video game console’s parent company, Sony Interactive Entertainment.

At issue during a Thursday afternoon hearing in San Francisco was whether Sony could deposit nearly $8 million worth of game credits directly to the gamers’ PlayStation accounts, or if the payout had to be in cash.

The plaintiffs accuse Sony of monopolizing the video game market for its digital PlayStation games, forcing gamers to pay higher prices. They claim Sony Interactive Entertainment, which owns and produces the PlayStation games and devices, eliminated competition in 2019 by barring the sale of digital game downloads by third-party retailers — making the PlayStation digital store the only place to buy them.

Onetime lead plaintiff Agustin Caccuri purchased a PlayStation5 Digital Edition, which does not have a disc drive and can only play games purchased from a digital retailer. The console, released during the height of the Covid-19 pandemic, was offered at a more affordable price than those with disc drives.

The proposed settlement tallied $7,850,000 in the form of PlayStation Network credits, which would be distributed directly to each of the settlement class members’ PlayStation accounts. There are about 4.5 million accounts eligible for payments, according to the plaintiffs.

U.S. District Judge Araceli Martínez-Olguín, a Joe Biden appointee, told attorneys for both parties that she had initially balked at the plan to pay in PlayStation credits.

“I’m trying to grasp if your substantive argument is that the account credits reflect monetary value more so than they reflect a coupon,” she said.

Martínez-Olguín rejected the proposed settlement last year because she found it resembled a coupon-based deal and did not include an estimated recovery range.

The judge said it was unclear that the PlayStation credits met the definition of a coupon as laid out in In re Online DVD, where the Ninth Circuit found a coupon requires customers to spend additional money, is limited to certain products and offers little flexibility in expiration or transferability.

Attorneys for both parties tried to sway Martínez-Olguín.

“Putting aside the threshold question, is it or isn’t it a coupon, even if it is, if you have a scenario like we have here where these are repeat users who keep on buying games and other things on the system,” Sony’s attorney Joshua Lerner with WilmerHale said. “Then a credit like this is uniquely effective, and the Ninth Circuit has said where class members have repeat business relationships, then a scenario like this not only avoids the inefficiency of increased administration costs, but it also makes sense because they actually use it.”

Class attorney Michael Buchman of Motley Rice LLC said class members had purchased 22 games during the class period.

“That is a large number of purchases,” he said. “These people are purchasing a lot of these games because these are the only games that will work on this console. They have already made a commitment to Sony and SIE, based on their console selection knowing that their games will only work with SIE digital games and not Xbox or Nintendo.”

Buchman said the estimated recovery range was between $33.66 and $0.91. Among the games listed on the PlayStation Store, there were nearly 2,000 that are under $2. Another 118 games are listed for only $0.19.

“There are games readily available to class members that require no additional payment,” he said. “The credits will apply to all products on the website, not just games but other content and anything available on the Sony PlayStation store.”

The credit is not transferable but it does not expire, Buchman said.

“For all of these reasons we think it should not be considered a coupon,” he added.

Martínez-Olguín also questioned whether Caccuri and former plaintiff Allen Neumark are pursuing individual settlements with Sony since they’re no longer members of the class.

According to Buchman, they were entitled to some amount of credit because their efforts were helpful during the discovery phase of the case.

“Maybe the class is fine and your settlement is fine,” Martínez-Olguín said. “The larger issue is that you still have them being paid from the proposed settlement fund, and someone who is not a member of the class has no business taking a penny from that fund.”

A separate motion must be made to remove them from the class action.

The settlement does not address the request to bar Sony from excluding the third-party sales of its games.

Attorneys did not provide additional comment after the hearing, but will address Martínez-Olguín’s concerns in a future motion.