BizLawCentral: US court will hear claims against brand licensing deals

Electronic Arts (EA) makes computer games. Like almost all computer games manufacturers, EA has entered into exclusive licensing deals with various organisations.

Among those organisations are National Football League (NFL), National Collegiate Athletic Association (NCAA) and Arena Football League.

Last week, a Federal Judge in California "certified" a national class action law suit against EA in which it is alleged that the deals lock out third parties and lack of competition has facilitated the overcharging of customers for the games.

The lawyers who have launched the class action say "Delaware-company Electronic Arts violated antitrust and consumer protection laws by holding exclusive license agreements with NFL, NCAA, and Arena Football League. Through these agreements, Electronic Arts developed and published highly coveted sports titles that generated thousands of millions of dollars in sales while allegedly restricting competition, the lawsuit states."

The Order specifically excludes mobile device versions of the games - computers and consoles are the only versions included. The Judge rejected an application for an injunction but has said that he will allow testimony from Jill Hamburger, a computer game industry expert.

"The lawsuit claims that the agreements may have inflated the price of certain Electronic Arts-produced sports titles including Madden NFL, by up to 70 percent. Madden NFL is Electronic Arts biggest sports franchise in the United States and occupies four of the top 10 best selling games in the nation, industry reports claim," say the lawyers. ]

That's as may be but - and here's a big but: exclusive licensing deals are the lifeblood of the computer game industry. We are not talking, here, about characters created for the game such as Mario or Lemmings but, rather, things like NASCAR, Formula One, a raft of soccer league games, etc.

Miss Hamburger has been with Best Buy as a VP in movies and games since 1998. A Tiger Woods golf game (PGA Tour 08) from EA sells for USD9.99. That's the same as Madden NFL 08. Most of the other games - some of which are branded but most are in-house developments - sell for somewhere between USD14 to USD50. Games from many other manufacturers are priced in the same range, whether they are in-house brands or have some external tie-in.

And NHL09 and Woods 08 are available for download direct from EA's Singapore website for SGD19.0 each - that's about USD15. The latest versions of FIFA games are SGD51 - 65 which is very similar to the latest fantasy and shoot-em-up games, some of which actually cost more.

The real reason that the case is important is because it challenges the right of brand owners to enter into exclusive deals.

If the case proceeds - and US class actions have a habit of turning to dust if they meet stern resistance - it might be extrapolated to mean that Disney characters, for example, may not be restricted to a single lunch-box manufacturer; sporting events would not be allowed to grant exclusive broadcast rights.

Arguably, the class action targets the wrong party anyway: EA are the grantee of the rights, not the grantor. Surely a more correct party would be the organisation which licenses its name to one entity only.

The case is by no means properly under way and the evidence that is readily available does not support the "millions" of customers that the lawyers claim have been "gouged."

And its conclusion in favour of the plaintiffs seems a very uncertain prospect.