Software licences classified as “goods” under the ACL

Software licences have been held to be “goods” under the Australian Consumer Law (ACL) by the Federal Court of Australia in Australian Competition and Consumer Commission v Valve Corporation (No 3) [2016] FCA 196.  The case also clarified the position of “choice of law” clauses and highlighted the difficulties of contracting out of ACL consumer guarantees.

The alleged breaches of the ACL

Valve Corporation (Valve) operates Steam, a popular online platform for the distribution of computer games.  In order to use Steam, customers are required to accept the terms of the Steam Subscriber Agreement that attempts to exclude any warranty as to the merchantability of the software, and the right to any refunds or compensation, even if the software is faulty.

The Australian Competition and Consumer Commission (ACCC) commenced proceedings against Valve alleging that such provisions contravened sections 18(1) and 29(1)(m) of the ACL.

Valve argued that the ACL did not apply because:

• it was a foreign entity and did not “carry on business in Australia” under section 5(1)(g) of the Competition and Consumer Act 2010 (Cth) (CCA);
• the law of Washington State applied due to a “choice of law” provision in the Steam Subscriber Agreement; and
• the issue of software licences did not constitute a “supply of goods” under section 4(1) of the CCA.

The judgement of the Federal Court

Valve’s arguments were dismissed, with the Court finding that:

• Valve did conduct business in Australia, as it had cached copies of the software on Australian servers, engaged Australian agents in its supply chain, and the relevant customer relationships and transactions had occurred in Australia;
• the ACL continued to apply despite the “choice of law” provision in the Steam Subscriber Agreement; and
• supplying software downloads was a “supply of goods” under section 4(1) of the CCA.

Therefore, the statutory consumer guarantees under the ACL (including that goods must be “fit for purpose” and “of acceptable quality”) applied to Valve’s supply of software licences via Steam.  Valve had breached the ACL by purporting to exclude these consumer guarantees and refuse refunds to its consumers in the Steam Subscriber Agreement.

The Federal Court ordered Valve to pay a $3 million fine and cover 75% of the ACCC’s legal costs.  Valve was also ordered to undertake a compliance program and publish Consumer Rights Notices regarding Australian consumers’ rights.

Takeaways

The case highlights that consumer guarantees cannot be excluded, restricted or modified, and serves as a reminder that all traders, even those who are based overseas, that supply goods and services to Australian consumers, should seek legal advice to ensure that their contractual terms comply with the ACL.

Links and further references

Cases

Australian Competition and Consumer Commission v Valve Corporation (No 3) [2016] FCA 196 – Principal liability

Australian Competition and Consumer Commission v Valve Corporation (No 7) [2016] FCA 1553 – Corrective orders

Australian Competition and Consumer Commission v Valve Corporation (No 8) [2016] FCA 1584 – Costs

Other links

ACCC: Consumer Guarantees

ACCC: Shopping online

Australian Consumer Law: Business and the ACL

Further information about Australian Consumer Law

If you need assistance determining whether that your online business complies with the ACL, please telephone me for an obligation free and confidential discussion.

Disclaimer

This article contains general commentary only.  You should not rely on the commentary as legal advice.  Specific legal advice should be obtained to ascertain how the law applies to your particular circumstances.

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