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Class Action Suit Accuses GameStop Of Deceptive Used Game Practices
by Kris Graft [PC, Console/PC]
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March 26, 2010
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California resident James Collins on Tuesday filed a class action lawsuit against major U.S. video game retailer GameStop, alleging "deceptive and misleading practices" pertaining to the company's used video game sales.
Collins' complaint, obtained by Gamasutra and originally uncovered by IGN, said used titles sold at GameStop and GameStop.com, such as Dragon Age, Battlefield: Bad Company 2, Mass Effect 2 and Gears of War 2: Game of the Year Edition, have packaging that says free downloadable content is included.
This free content is obtained with a one-time-use download code, which is entered into a digital storefront such as Xbox Live. However, after that code is used by a games' original owner, the code expires, and the content is only then available by paying an extra fee.
The problem, according to Collins' complaint, is that GameStop allegedly deceives consumers by not making clear that the content is not included for free with a used game. "In short, as a result of GameStop's deceptive and misleading practices, consumers who purchase used games from GameStop unknowingly find that they must pay an additional fee to access the full game they thought they purchased," the complaint said.
Game publishers do not see any revenues from used game sales -- used game retailers are the only parties that benefit directly from preowned sales. However in recent years, game publishers have tried to create incentive for buying games brand new by including one-time use codes that can be used to download content such as extra levels, maps or weapons in games. Without a free download code, the content can cost around an extra $10-$15.
"GameStop tricks consumers into paying more for a used game than they would if they purchased the same game and content new," said the complaint. The plaintiff is seeking an amount in excess of $5 million on behalf of the class, the filing said. The plaintiff is also demanding that GameStop "correct" the advertising on used games and provide legal fees to the plaintiff.
Chris Olivera, VP of corporate communications and public affairs at GameStop told Gamasutra that the company is aware of the lawsuit, but does not comment on impending legal actions.
GameStop's used games business is lucrative. While used product sales make up around 20 percent of the company's revenue, around half of the retailer's gross profits come from used product sales. Where gross profit margins for new games is about 20 percent, it's 50 percent for used titles. Total annual revenue from used game sales at GameStop is reportedly $2 billion.
According to the filing, the complaint was prompted when Collins purchased a used copy of Electronic Arts' Dragon Age in January for $55, or $5 less than the new price, and realized a week after the seven-day return policy expired that the download code advertised on the box for free content was already used. The content normally costs $15.
"As a result of GameStop's concealment, plaintiff ultimately paid $10 more to purchase a used game than he would have had he purchased a brand new copy of the exact same game," the filing said.
Analyst Arvind Bhatia with Stern Agee said, "While we are clearly not legal experts, it does not seem to us this lawsuit will be material. ... It seems to us if this is an issue of making sure the used games customer is fully informed, it should be easily fixable with some sort of label that [GameStop] can put on the used copy that fully explains the situation."
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I rely on you guys to straighten this out. Would love to see GameStop stopped, like you do.
A slight aside, but I feel that the relationship between game retailers and publishers should be akin to that of movie theaters and the studios. Movie theaters don't make money off a new release for the first two weeks that a movie's in theaters, all that money goes straight to the studios. Retailers shouldn't be allowed to sell a used copy of a game until at least two weeks past the games debut in stores. It wouldn't fix the major issue of publishers not getting a piece of the used market but it gives them an opportunity to sell their games at the peek of consumer demand without having to compete against slightly cheaper versions of the game that yields no profit for them at all.
Gamestop didn't put the labeling there, so why is it their fault that it is there? That labeling is all done by the publisher. It should fall on the publisher to make sure that the customer is informed that the content is one time use only.
Ultimately, I think the publisher is responsible for the misunderstanding but Gamestop are in a better position to resolve it.
Regarding Joshua's point, it's a class action lawsuit -- he's not asking for 5 million personally, but for all people suckered into buying the used games. Very few used games have one-time downloadable content, so 5 million sounds about right for every customer who's every purchased one of those titles.
Regarding used game sales in general, while I'm all for consumer freedom, there is something a bit odd about reselling something that in no way loses value for being pre-owned. The game itself doesn't degrade after a play-through, after all. Then again, this will all be a non-issue when developers convert to entirely digital distribution. Gamestop's days are numbered (I don't say that maliciously -- I just don't see how they will survive without used game sales).
"Then again, this will all be a non-issue when developers convert to entirely digital distribution."
I would personally rephrase this to: "Then again, this may all be a non-issue if customers choose to convert to entirely online distribution."
I would say it's completely Gamestop's responsibility. If I sell a used DS in its original packaging, but it's missing its charger, I can't point to the box and say "Look, Nintendo says it comes with a charger. It's their fault that their package doesn't represent the item that I'm selling." It's my responsibility to accurately represent the item that I'm selling.
@Michael Will
The publishers' relationship with Gamestop is voluntary for both parties. There are tons of other places for people to buy video games (Best Buy, Wal-Mart, Toys R Us, numerous smaller game retailers, online), so neither is absolutely dependent on the other for survival (unless the publishers abandoned Gamestop in mass). If publishers start deciding that Gamestop is a leech on the industry instead of a boon, they'll quit signing contracts with them. Until that happens, we can assume that Gamestop, all things considered, is still beneficial to publishers.
It not the publisher's fault. Games aren't packaged to be sold used. Period. Gamestop provides a trade in service. If their service makes the labels false, its their job to tell the people buying their used copies that the code is invalid.
Ahhh yes that does make a lot more sense. Thanks for clarifying that.
IF the customers do not want to go all online distribution, then the first company to force them to will lose out on a lot of sales. Publishers that think that they tell customers what to want will lose revenue and die out. It appears that a lot of people still want retail.
And I can guarantee you that the next handhelds from both Sony and Nintendo will not be online distribution only. I would put a lot of money on it too.
So maybe they should indeed put a warning like that, just because GameStop seems to need a smack to the face anyway.
Then I also say: Sueing Gamestop for a publisher ridiculous idea that is actually copyright infrigment, is in my point of view ridiculous, but currently the US (both citizens, companies and government) behavior toward copyright is each time more over the top ridiculous and hilarious, this lawsuit is not a surprise.
I blame the publisher more than the store, but I fully knew I was buying a used game. Publishers are doing this to encourage people to buy a new copy, Gamestop has nothing to do with that.
I think it shows that consumers are not willing to pay full price for games that are digital only. Maybe 99 cents - 9.99 games on the iPhone, but any digital download only system or console that has $40-60 games is likely going to flop.
Unless all of them decide to do it, and the you might see collusion lawsuits.
I have no bias towards or against Gamestop, but the suit is rediculous.
I do agree about the marketing and advertising aspect of the complaint. GameStop advertises new games for xx amount with the trade of selected qualified games which isn't a bad deal when you consider the trade in credit for certain games, however they fail to inform you that you'll be paying the tax on the full retail price vice the new 'lower' price because of your trade it. The game will get discounted down the xx amount, but you pay full taxes. I remember an incident with a fellow customer when GameStop had the trade in your DS towards a DS lite promotion and get instead of paying $129.99, you'll pay $79.99. So after the trade, he is informed of the difference which was not remotely close to $79.99 because he was paying the tax on $129.99 and not $79.99 and he was like... "hold on, tax is 8.25% and it should be xx amount..." They tried explaining to him that the trade advertised actually meant that he was paying $79.99, only that after the credit, it'd appear that way and he'd still be charged for the $129.99 tax. This was at the time where it was new and these systems were a little hard to come by and I think it was suppose to be a gift for his daughter and he made such a huge scene... He took back his DS and was like, you guys need to fix this and that it was against the law to be taxed on etc... and went on and on... then said there is going to be a really upset girl when he gets home because they effed up and stormed out... < this was in a Southern California GameStop by the way... anyway
Publishers have been sending different 'batches' of newly released games to tackle the DLC issue. To help increase new sales, they try to advertise, buy new/reserve your copy to get 'DLC' content and it is usually exclusive only to GameStop retailers, then the next wave would not have it advertised on the cover.
Personally, as a consumer, I make sure that I'm fully aware at what I'm buying and ask questions if its a used game. I don't see this going anyway, really. Just an easy fix in my opinion and they'll probably send down a letter/email about training their employees better on the resell of used games containing DLC. There has been many lawsuit filed against GameStop and with this one, I don't see it going anywhere because of the 'fine print' that is provided in the user game manual.
I don't know why the game industry thinks it deserves to make money off of used games. Just because it is a big market that is making some decent money doesn't mean you have some legal right to tap it. If you want the money so much why don't you open up a store?
I might buy used for a cheaper price. What's more likely the case is that I'll get a used game because it's now impossible to find it NEW anywhere. Got a PS2 you want to complete your .hack library for - good luck only getting new copies of all those games. But if you buy GU as a used title, you're an evil pirate nazi who wants to rape babies, etc.
It's an idiotic response to the consumer because the 'publisher' wants to CONTROL WHAT YOU BUY, much less how you get to buy it. And, hey, attacking one of your largest retail channels like this is just another brilliant idea from the same exact guys who put PC gaming were it is today!
www.GameStopLawsuit.com