Law firms: Facebook Credits violates antitrust law

Law firms: Facebook Credits violates antitrust law

Summary: Facebook is once again being accused of violating U.S. antitrust laws by requiring that social game developers use Facebook Credits on its platform. This time two law firms are getting involved.

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Law firms Newman Du Wors and Strange & Carpenter announced today they are investigating Facebook's requirement for social game developers to use Facebook Credits. They argue that the prerequisite means Facebook gamers don't have a choice when it comes to making payments and virtual currency providers cannot offer an alternative. As a result, the two law firms believe Facebook may be in violation of U.S. antitrust laws, which prohibit the tying two such services together.

Attorney Derek Newman and attorney Brian Strange have thus launched a website called Stop Facebook Credits to bring public attention to the issue. Their main argument is that prior to the Facebook Credits requirement, the virtual currency industry enjoyed a healthy competitive environment. Now it's next to non-existent.

In the video above, Newman explains the harm Facebook Credits has caused. If you prefer a lengthier explanation, here's an excerpt from the website:

Facebook is forcing game developers to use Facebook Credits in order to access its social-gaming platform. But Facebook originally told developers that this platform was completely free and that developers could keep the profits they earned. Facebook hasn't followed through on its promise to game developers. Instead, Facebook requires all game developers to use Facebook Credits and pay Facebook a mandatory 30% cut of all consumer revenue. Game developers must also promise not to charge gamers less on any non-Facebook platform than they do on Facebook. Because developers don't have a choice, Facebook can collect higher-than-normal fees for Facebook Credits and dictate the prices that developers charge gamers on and off Facebook. That's unfair, and probably illegal.

In short, everybody loses, according to the duo, since Facebook Credits:

  • Costs game developers tens of millions of dollars each month in excessive fees.
  • Prevents every other virtual-currency provider from offering a competitive service for games on Facebook.
  • Denies the gaming public a competitive marketplace.

So, what can you do about it? I'm sure Newman and Strange are glad you asked. Here's their answer:

You can take action: ask a judge to force Facebook to pay you for the harm you suffered and restore competition to the virtual-currency marketplace. We can help, and if you hire us you won't pay any fees unless we succeed.

"Illegal tying occurs when one company dominates an area of commerce with a product and then forces customers to accept another product in order to use the first," Newman said in a statement.

"Virtual-currency companies, game developers, and the entire social gaming community are paying higher prices and receiving fewer services," Strange said in a statement. "Concerned citizens can learn more and take action against this practice on our Stop Facebook Credits website."

Facebook Credits launched as an alpha in May 2009. The beta stage started in February 2010 and ended with a final version in January 2011. As of July 2011, all Facebook game developers have been required to only process payments through Facebook Credits. It is not (yet?) a mandatory payment option for Facebook apps.

Even before the requirement kicked in, in June 2011, a US public interest group Consumer Watchdog filed an antitrust complaint with the Federal Trade Commission (FTC) about Facebook Credits, arguing that the virtual currency used for purchases such as assets in online games is anticompetitive. When Facebook settled with the FTC three months ago, however, Facebook Credits was not mentioned.

Facebook takes a 30 percent cut of all revenue earned through Facebook Credits, leaving developers with the remaining 70 percent. Facebook's IPO numbers revealed that Facebook paid out $1.4 billion to developers in 2011 from transactions enabled by its Facebook's Payments infrastructure. Facebook Credits is growing as a percentage of Facebook's overall revenue, but the majority still comes from ads.

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Topics: Security, Social Enterprise

Emil Protalinski

About Emil Protalinski

Emil is a freelance journalist writing for CNET and ZDNet. Over the years,
he has covered the tech industry for multiple publications, including Ars
Technica, Neowin, and TechSpot.

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9 comments
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  • I'm against virtual currency as a way to get ahead in a game, period.

    I'm against virtual currency as a way to get ahead in a game, period. I disagree with the notion that somebody with deep pockets should have an advantage when it comes to progression, especially if we're talking about games that are multiplayer (which nearly all Facebook games are).

    Games outside of Facebook have shown that virtual currencies aren't needed to make a profit, and aren't needed to buy power or buy levels. This has been a phenomenon unique to Facebook, and is a primary reason why I don't play Facebook games anymore.
    CobraA1
  • Repeal them

    By my count, this is reason #4,254,179 to repeal the anti-trust laws.

    Eric
    johngalt_0705
    • Re: Repeal them

      Oh, wonderful idea. Take the legal doctrine that protects competition, the very basis of capitalism and the thing that makes it effective as a tool for improving society, and throw it out.

      In my experience, capitalism is a lot like the Bible. Everyone loves to talk about how wonderful it is and how everyone should live by it, but the moment you ask them to actually live by its principles *themselves,* they start squirming and thinking up any excuse they can to weasel out of it and develop entire belief systems based around fundamental principles not applying to them if they find it inconvenient.
      masonwheeler
      • Well, perhaps you should actually read it.

        "but the moment you ask them to actually live by its principles *themselves,*"

        Well, perhaps you should actually read it. The purpose of the book is not actually to set fourth a gazillion principles for people to follow strictly, but rather to show the need for a savior. We don't need to do any weaseling or extra rationalizing to see that Jesus came for a purpose, and that purpose was to forgive us. To turn the Bible into a gazillion rules is in fact squirming and thinking up any excuse you can to weasel out of the true message it has. The Pharisees made the same mistake - they got so all bent out of shape over rules and regulations that they missed the central message.
        CobraA1
    • Only corporate vampires would suggest a repeal of anti-trust laws

      WTF? You have over 4 million reasons why Anti-trust laws need to be repealed? Let me guess, you were also in favor of repealing the Glass-Steagall ACT which once it was repealed led to the Banks derivatives scheme which in turn brought about the economic downturn in 2008 and which will most likely affect/cost us for generations.

      Do you have any clue what the antitrust laws are for? Or are you just putting you mouth into gear without taking your brain out of park first? Its unintelligent acts like this that let the real crooks like the banksters get away with things like repeal of Glass-Steagall. I bet you think the US Constitution is out dated and in need of replacing too ey?
      BlueCollarCritic
  • Society needs to grow up.. if you don't like it... don't use facebook

    problem solved.
    /thread
    bwalker
    • Pretty much exactly what I did

      Yeah, that's pretty much what I did. I don't play Facebook games at all. I play the many games that don't have such a silly system.
      CobraA1
  • Shameful solicitation

    by Newman and Strange! Always stay away from any shark who claims "I can help you, and it won't cost you a thing unless I win".... I know they think they are "perfprming a public service" by publicising this, and they are within their "legal rights" for advertising, *BUT* really, now, was the solicitation really needed as well??? Oh, and questioning minds should always ask ahead of time "And, it you DO win, how much will it cost me?" The answer might just be a surprise!
    BTW, I agree with other posts (though we are apparently in a minority among "game enthusiasts") that paying anything, virtual or real, to get ahead in a game is nothing short of cheating or laziness. So, that is one of many reasons I do not "fb".
    Willnott
  • Another thing about Facebook!

    OK - off topic, but I often get livid when I see various sites asking "subscribers" to "login using Facebook" - to the extent that in many cases they are (perhaps unknowingly) limiting their number of subscribers, if the only credentials they will honor are facebook accounts. And folks wonder about their "privacy" on the one hand, but carelessly run around spreading their "news" on the other hand???? For example, a local TV station just went that route, and will not allow anyone to comment on their stories without a Facebook login. I sent an email to the station president, and it was not even acknowledged. Talk about a "flip-off"!!!
    Willnott