Australian Competition and Consumer Commission v Valve Corporation (No 6) [2016] FCA 1348 (15 November 2016)

Last Updated: 16 November 2016

FEDERAL COURT OF AUSTRALIA

Australian Competition and Consumer Commission v Valve Corporation (No 6) [2016] FCA 1348

File number:	NSD 886 of 2014
Judge:	EDELMAN J
Date of judgment:	15 November 2016
Catchwords:	PRACTICE AND PROCEDURE – application for confidentiality orders – no present risk of disclosure –proposed orders expressed to bind the Court or the world at large – some information already in public domain – vague assertions of prejudice – application dismissed
Legislation:	Australian Consumer Law (Schedule 2 of the Competition and Consumer Act 2010 (Cth)) Federal Court of Australia Act 1976 (Cth) ss 37AF, 37AG(1)(a) Federal Court Rules 2011 (Cth) rr 2.32, 2.32(4)
Cases cited:	Australian Competition and Consumer Commission v Valve Corporation (No 3) [2016] FCA 196 Australian Competition and Consumer Commission v Valve Corporation (No 5) [2016] FCA 741 Pegang Mining Co Ltd v Choong Sam [1969] 2 MLJ 52 State of Victoria v Sutton [1998] HCA 56; (1998) 195 CLR 291
Date of hearing:	15 November 2016
Registry:	New South Wales
Division:	General Division
National Practice Area:	Commercial and Corporations
Sub-area:	Regulator and Consumer Protection
Category:	Catchwords
Number of paragraphs:	19
Counsel for the Applicant:	Ms NL Sharp
Solicitor for the Applicant:	Thomson Geer
Counsel for the Respondent:	Mr ADB Fox
Solicitor for the Respondent:	PricewaterhouseCoopers

ORDERS

		NSD 886 of 2014
BETWEEN:	AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Applicant
AND:	VALVE CORPORATION Respondent

JUDGE:	EDELMAN J
DATE OF ORDER:	15 NOVEMBER 2016

THE COURT ORDERS THAT:

1. The application filed 14 October 2016 be dismissed.
2. The respondent pay the applicant’s costs of the application to be taxed if not agreed.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

EDELMAN J:

Introduction

1. This is a second interlocutory application by the respondent, Valve, for confidentiality orders prior to a hearing concerning relief. The application and relief hearing follows my findings that Valve contravened provisions of the Australian Consumer Law, being Sch 2 of the Competition and Consumer Act 2010 (Cth): see Australian Competition and Consumer Commission v Valve Corporation (No 3) [2016] FCA 196.
2. This second application is in very similar terms to the first unsuccessful application by Valve, which was dismissed for reasons including that it was premature and unnecessary to determine before the relief hearing: Australian Competition and Consumer Commission v Valve Corporation (No 5) [2016] FCA 741. In my reasons for dismissing the first application, I expressed serious doubts whether the information could meet the requirements for a non-disclosure order. Valve then brought a second application, and sought a hearing before the relief hearing. After communication from the Court asking for an explanation as to why the matter needed to be heard before the relief hearing, counsel for Valve, Mr Fox, accepted that an earlier hearing was unnecessary.
3. The second application has now been heard. The orders sought, and the submissions of Mr Fox, involve overkill. They primarily concern only four answers to interrogatories. There is no real prospect that the information in those four answers will be disclosed by the ACCC. None of the orders sought were directed to the ACCC. A number of the orders were instead proposed orders that the Court order itself to follow a particular procedure. Other orders purported to bind the world at large, including any media reporting of the proceeding or any media requests for access to information, without any opportunity for any such potentially interested party to be represented.
4. None of the orders sought is necessary to prevent prejudice to the proper administration of justice. Some of the proposed orders would, themselves, cause prejudice to the proper administration of justice. The application is dismissed with costs.

The information and the application

5. Valve brings this application for confidentiality orders under s 37AF of the Federal Court of Australia Act 1976 (Cth) on the basis that the orders are necessary to prevent prejudice to the proper administration of justice (s 37AG(1)(a)).
6. The information about which confidentiality orders are sought by Valve is contained in answers given by Valve to four interrogatories, which is repeated in various affidavit evidence and submissions. Those answers are as follows:

(1) Valve’s worldwide gross revenue from all sources for 2011, 2012, 2013, 2014 and 2015 (up to 1 June 2015) (interrogatory 11);
(2) Valve’s worldwide net profit from all sources for 2011, 2012, 2013, 2014 and 2015 (up to 1 June 2015) (interrogatory 12);
(3) Valve’s estimated net profit from purchases (subscriptions) by Australian Subscribers to Valve’s video games and third party games for 2011, 2012, 2013, 2014 and 2015 (up to 1 June 2015) (interrogatory 13); and
(4) Valve’s estimated gross revenue from purchases (subscriptions) by Australian Subscribers to Valve’s video games and third party games for 2011, 2012, 2013, 2014 and 2015 (up to 1 June 2015) (interrogatory 14).

7. The interlocutory orders sought by Valve are as follows:

Interlocutory orders sought
...
Procedure for the Relief Hearing

2. The document titled “Valve’s Confidential Exhibit” to the Respondent’s Answers to Interrogatories be placed in a sealed envelope and marked “NOT TO BE OPENED WITHOUT THE LEAVE OF A JUDGE”.
3. The Respondent’s Confidential Information comprised in those parts of the Relief Proceedings Court Book (which are marked in yellow highlighting) shall not be made available for public inspection in the Registry.
4. The Respondent’s Confidential Information, and those parts of any affidavits or written submissions of either party which contain any of the Respondent’s Confidential Information, be marked ‘confidential’ on the Court file when tendered or read, and not be made available for inspection in the Registry.
5. The Respondent’s Confidential Information shall not appear in the Court transcript other than in a confidential copy of the transcript, which shall only be available to the Court and to the persons identified in sub-paragraphs 7(b)-(d) below.
6. The Respondent’s Confidential Information not be disclosed in open Court.
7. Access to the Respondent’s Confidential Information be restricted to:

(a) the Court;
(b) the legal representatives of, and legal officers and support staff in the employ of, the Applicant engaged for the purposes of these proceedings;
(c) the legal representatives (and their support staff) for the Respondent engaged for the purposes of these proceedings; and
(d) the Respondent’s General Counsel, Mr Karl Quackenbush, and other relevant staff of the Respondent.

Publication of reasons following Relief Hearing

8. Prior to the publication of the Court’s reasons for judgment following the Relief Hearing, and in the event the Respondent’s Confidential Information forms part of those reasons, the Court will provide the parties with a copy of the reasons proposed to be published and an opportunity to make any submissions in respect of the publication of the Court’s reasons in that form.

Time period for suppression

9. The suppression of the Respondent’s Confidential Information effected by Orders 2 to 8 shall remain in place until 15 November 2021.

...

The reasons why the application is dismissed

8. None of the orders sought by Valve is necessary to prevent prejudice to the proper administration of justice. This is for seven reasons, each of which would be independently sufficient to dismiss the application.
9. First, there is presently no risk at all of any disclosure of any of the information which Valve seeks to protect. Each of the documents which contains the confidential information is a restricted document: Federal Court Rules 2011 (Cth) r 2.32. They cannot be inspected without leave: Federal Court Rules r 2.32(4). If a third party sought leave to inspect those documents then Valve would be given the opportunity to make submissions about why inspection should not be permitted. Further, counsel for the ACCC quite properly has accepted, and previously informed Valve, that she can make her submissions at the relief hearing without expressly referring to the specifics of any of Valve’s allegedly confidential information.
10. Secondly, the framing of Valve’s proposed orders is unusual. None of the proposed interlocutory orders is generally directed to any particular person or persons. One exception is a proposed order by which Valve proposed that the Court makes orders against itself in terms that, prior to publication of reasons for judgment, and in the event that the confidential information forms part of those reasons, “the Court will provide the parties with a copy of the reasons proposed to be published and an opportunity to make any submissions in respect of the publication of the Court’s reasons in that form”. Usually, such matters would be raised by a polite request by counsel during the hearing rather than an interlocutory application seeking that the Court make orders to bind itself not to take a course of conduct that Valve does not desire.
11. Thirdly, Valve’s assumption is that third parties, such as media outlets, should be bound by the orders even though none was joined as a party to this hearing nor was any given any notice of the application or opportunity to respond to it. This assumption is, of course, false: State of Victoria v Sutton [1998] HCA 56; (1998) 195 CLR 291, 316-317 [76]-[78] (McHugh J); Pegang Mining Co Ltd v Choong Sam [1969] 2 MLJ 52, 55-56 (Lord Diplock).
12. Fourthly, it may not be necessary to refer to the particular amounts of Valve’s revenue and profits in my reasons concerning remedies. Courts are sensitive to the commercial concerns of litigants. Simply because a respondent is found to have contravened provisions of particular legislation is not a sufficient reason for its private, commercial information to be disclosed. However, sometimes that information is not truly confidential, or its disclosure would not truly cause real prejudice. A balance needs to be struck in provision of reasons for decision. That balance is between, on the one hand, the need for transparency in judicial reasons for decision which provide guidance for other cases, and the commercial concerns of a respondent to the litigation.
13. Fifthly, in my reasons for decision dismissing Valve’s first confidentiality application, I expressed serious doubt whether the information which Valve sought to suppress was confidential. Initially, Valve submitted that it was confidential information that Valve was a very profitable enterprise. I explained that this bold submission was made despite Valve itself boasting on its website that Steam is the world’s largest online gaming platform and that it “connects its 35 million active users to each other” and that it is “available in 237 countries” (a claim which displays a curious understanding of geography). Further, as I also explained in that judgment, publicly available articles provide financial estimates which are closely related to the information that Valve seeks orders to suppress. These include a magazine article in 2011 which reported that Forbes claims various sources have valued Valve between USD2 billion and USD4 billion with estimated revenue in the “high hundreds of millions”, and an article in 2012 which reported that Forbes said that the most conservative estimates put Valve’s enterprise value at more than $3 billion (although the New York Times reported in 2012 that its value was estimated at $2.5 billion). Another website called Steam Spy, which claims to rely on actual data provided by Valve, estimates that Valve generated $3.5 billion in earnings in 2015.
14. Sixthly, even assuming that all the information is confidential, the grounds upon which Valve said that its disclosure would cause prejudice to it involved vague assertions which were unsupported by any concrete evidence. For instance, Valve said that revealing this information would enable competitors to reverse engineer the information to determine Valve’s average revenue and net profit per subscriber in Australia and worldwide. Valve did not explain how this reverse engineering could occur other than to assert that somehow it could be done by combining the information with publicly available information.
15. In any event, Valve did not provide any substantial evidence or submission explaining how a competitor could gain an advantage from the knowledge of Valve’s average revenue and net profit per subscriber in Australia. Valve asserted that revealing the information would enable competitors to gauge “their position in the market as against that of Valve” or provide benchmarks by which competitors could measure their relative success or failure. It appeared to be submitted, with a straight face, that competitors in the market would not otherwise have sought to gauge their position against a market participant in Australia who has 2.2 million subscribers. As a submission (or, more accurately, an assertion) which is essentially one of economics, it is even more curious in circumstances in which the industry is one characterised by rapid innovation.
16. Another two bases upon which Valve submitted that revealing the information would cause prejudice to it was that its competitors do not publish the information and that publication of the information might lead Valve’s suppliers to demand higher prices because they have insights into Valve’s profitability margins. The submission that competitors do not publish the information was hotly disputed. The ACCC provided affidavit evidence that some similar information was disclosed by companies including Electronic Arts, Ubisoft, and CD Projekt. For instance, Electronic Arts disclosed that in 2014 it earned GAAP net revenue of $3.6 billion.
17. Seventhly, all of the information is historical data. The most recent of the information is nearly a year and a half old. As I have explained, this is an industry characterised by rapid innovation. And yet, in its extraordinary overreach, Valve sought orders that the information be suppressed for five years until 15 November 2021. This would have the effect of suppressing one-fifth of the information, for up to a decade from the time it was produced, in an innovative industry.

Conclusion

18. Apart from the principal information about which the confidentiality orders in this application were sought, the Court Book for the relief hearing also contains apparent claims for confidentiality over correspondence between the ACCC and Valve concerning this litigation. The correspondence was prior to the liability hearing, and generally alleged contraventions of the Australian Consumer Law. Valve did not explain its apparent, but baffling, assumption that this correspondence should also be suppressed. In any event, the correspondence is on yellow paper in the Court book. The Court book itself is not a category of unrestricted document. If an application to inspect the Court book, other than unrestricted documents in it, then Valve can make submissions concerning why the Court should suppress the details of correspondence concerning this litigation.
19. The ACCC did not seek an order for indemnity costs of this application. Valve’s interlocutory application is dismissed with costs.

I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Edelman.

Associate:

Dated: 15 November 2016