Changes to Steam Subscriber Agreement – Good or Bad?
On the night of Thursday, September 27th, many of us who were online at the time received a notification from Steam that there is a change to the subscriber agreement. Aside from the jarring method used to pass this update, especially to us who were streaming at the time, the question is how this will impact us? Today, we will break that down.
Obligatory “I am not a lawyer,” the change to the subscriber agreement seems to be focused on updating their terminology around class action lawsuits and arbitration. It looks like the language is being written in such a way that it removes this clause from the agreement. In other words, this now becomes one of the only subscriber agreements that I personally have in which arbitration is specifically prohibited. This begs the question, why would Steam be going against the trend then?
The Arbitration Clause
If you have ever read an End User License Agreement of a Subscriber Agreement for any service in the past few decades, you undoubtedly noticed a section preventing you from joining class action lawsuit and requiring you to go through arbitration rather than a court. This isn’t just a technology thing, it’s across all industries. For example, if you purchase a car, you agree to arbitration. If you have a membership at a club, you agree to arbitration. If you buy an appliance for your house, you agree to arbitration. Moreover, the language for most of these agreements are written in such a way that, while you have to agree to arbitration, the corporation issuing the agreement is not required to use arbitration.
The reason for this based on studies performed by legal experts during the mid to late 20th century. In short, these studies show that the cost of arbitration is lower than going through the court system. Another main driver for this is the speed to resolution for corporations. Arbitration is usually binding whereas going through a court would allow for a lengthy appeal process which adds legal costs to any action taken against the company. It was also a deterrent to even beginning the process, as many users were unfamiliar with how to file an arbitration case and as a result were likely to take alternative actions first. Moreover, arbitration was viewed as inherently biased towards the company funding the arbitration, further reducing the interest in filing a case, especially when the companies typically included a clause stating they would determine the party to use for arbitration.
The Class Action Clause
Class Action lawsuits tend to generate high visibility when they occur. Moreover, they tend to benefit the originator of the class action case, not those who call into the class. And of course, they generate wildly high amounts of expense to push through the system. So much in fact, that most are settled before reaching conclusion. As a result, it was easily seen as a win-win for both companies and consumers when this clause is put into place. Whether true or not, the perception was enough that most consumers don’t fight this end of the EULA very often.
Why the Change?
I’m sure the gaming news channels will speculate left and right about this, but the reality is that the reason for this will forever remain a confidential “behind closed doors” reason. All we can really do is speculate. And to that end, I can only tell you what would have likely driven my motivations if I were an executive living in the present day and reading through the mountain of legal advice I was receiving.
First, the perception of these clauses was recently made public when Disney attempted to use a subscriber agreement to force arbitration on a completely unrelated case. this caused a ton of negative press which, frankly, was deserved. I can’t believe any executive would have honestly agreed to such an absurd thing, and more likely their legal team was given a free hand to litigate the case and decided to present this to the court which, from a legal standpoint, probably seemed rational. It’s hardly the first time Disney, or other companies have pulled this trick either. Either way, the world may benefit from this blunder in a positive way if we ultimately see what Steam started become a trend across the tech industry.
The second likely reason is that local laws, and even the courts themselves, are starting to see these arbitration agreements as a limit to how a company can file a claim against a defendant. To help explain, using the example of the Disney lawsuit above, if the company was seeking to file a lawsuit against a defendant who was a subscriber, the court stay rather than dismiss the case stating that they have no legal standing because they have an existing agreement in place.
The reason these one way arbitration cases work in the favor of larger organizations is that large organizations usually carry an on-staff legal team or at least have a firm on retainer. As a result, they aren’t typically incurring additional cost as long as the process is short enough that it doesn’t delay other required tasks. That allows them to focus on the reason they are there such as covering new legal requirements. On the other hand, an individual is not likely to have a lawyer on standby unless they do this kind of thing often. When a company suddenly sees a drastic increase the number of cases being handled, suddenly you may need more lawyers.
And this brings up the third point, the class action clauses. Thirty years ago, before the internet age really took off, class actions were often the only way to find out that you were a part of a lawsuit. Today, it’s very easy to reach out to numerous impacted individuals and help them file an individual lawsuit. The recent breakthroughs with AI make this even easier. As a result, it’s now more costly for a company to respond to multiple lawsuits instead of doing a single class action lawsuit. Moreover, the perception component of a class action lawsuit isn’t what it once was, since social media spreads awareness faster than a single headline news report would.
Good or Bad?
Honestly, I think this is a good move. I also like that it is Steam taking the first step. Don’t kid yourself though, this was done as a self-preservation measure not as some kind of white knight movement. As a business leader myself, I can tell you if I had the facts presented to me as I laid out above, obviously with the correct context and having consulted with my legal team on the implications, I would have drawn the same conclusion as Steam. Recent events have shown how vulnerable an arbitration clause can make you to bad press. And for a company largely perceived as doing things the right way, that is important.
Class actions are potentially more expensive if they are not allowed. That’s not even considering that these limitations aren’t necessarily legal (they haven’t truly been tested). And most important of all, they aren’t fulfilling the original purpose anymore, which was to try and force users to go through the internal remediation processes within the company before going through the difficulty of finding outside methods of remediation.
In other words, they simply want you to open a ticket that they can try and resolve before you sue them. And this, I 100% support.
