ELECTRONIC ARTS SETTLES CLASS ACTION FOR $27 MILLION OVER VIDEOGAME PRICE-FIXING

In 2008, a class action was filed in the Northern District of California against Electronic Arts, Inc. (NASDAQ: ERTS) (“EA”) for fixing prices of their football videogames. The essential allegations were that through signing exclusive licensing deals with the NFL, AFL, and NCAA (both pro-leagues and the college league), EA cornered the market on football games, then used that position to charge consumers more per game. In other words, if you are a fan of football and wanted to buy a game which featured real pro or college teams, you had to buy an EA game, and that game would be more expensive than other video games in part due to the fact that EA knew you had no other options. In particular, Madden NFL titles were seen to drive out competition from other manufacturers through the exclusive licenses, which EA allegedly capitalized upon.

After four and half years of litigation, EA has decided to settle the claims, with the class action settlement filed last Thursday. The major terms will be a refund of almost $7 per game for older titles (GameCube, PS2, Xbox) and almost $2 for newer (Wii, Xbox 360, PS3). In addition, EA will let their exclusive deal with the AFL expire in 2014 and not pursue another exclusive AFL deal for 5 years thereafter.

Currently, the settlement is awaiting court approval. In class actions, the court must approve a settlement to be sure that the interests of the class are being protected. Otherwise, a Defendant company and the Plaintiff Class attorney could strike a deal that benefited themselves more than the class. Yet, this appears on its face to be a good deal for the consumers, and court approval is expected. Purchasers of EA football titles from January 1, 2005 to the present should contact the plaintiffs’ counsel Hagens Berman at maddenNFL@hbsslaw.com.