Facebook settles antitrust suit over virtual currency

24 May 2017 9:49am

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19 May 2017. By Mike Swift.

Facebook and Social Ranger have reached an agreement to settle their antitrust litigation over claims that the social media giant illegally monopolized the market for virtual currency for online games, less than a month before the case was due to go to trial in Wilmington, Delaware.

In a court filing Thursday, Facebook and Social Ranger told US District Leonard P. Stark they have reached "an agreement in principle to resolve all claims asserted in this case and are in the process of exchanging documentation relating to a settlement agreement."

With that settlement agreement pending, Facebook and Social Ranger asked Stark to "stay all deadlines in connection with this litigation, and withhold all rulings, while the parties finalize their settlement agreement."

Social Ranger, which owns the rights to a predecessor company called Super Rewards that sold virtual currency used to play online games such as Candy Crush and FarmVille that were once staples on the Facebook platform, had been seeking more than $300 million in damages in a suit alleging Facebook violated the Sherman Act. A jury trial had been scheduled to start June 12.

Social Ranger has claimed Facebook "destroyed" competition for virtual currency when it started requiring in 2011 that game developers accept only its "Facebook Credits," excluding competing currencies.

No settlement terms were included in Thursday's filing. Kenneth Dorsney, a lawyer for Social Ranger, did not return a phone call or e-mail requesting comment. A Facebook spokeswoman declined to comment.

Facebook and Social Ranger previously battled in a hearing before Stark over whether the relevant market for virtual currency should consist of what Social Ranger dubbed "social network games" — including FarmVille and other games played solely through the Facebook platform — or should be defined as online games more broadly, as Facebook contends, which would expand the market to include games available as apps on mobile devices.

Facebook controls only 15 percent of the market for virtual currency sold in games, its lawyers told Stark in that hearing February 28, arguing in an effort to forestall a trial that the social network doesn't have market power in the market for in-game transactions in online games.

"Facebook is fighting to stay relevant here," Facebook lawyer Thomas Barnett said. "It has a small share of what's going on."

Stark has not yet ruled on that motion for summary judgment. Last autumn, the two sides battled over whether Facebook founder Mark Zuckerberg was a central figure in Facebook's virtual currency policy and would have to testify in the case.

Zuckerberg "single-handedly made the decision to forever foreclose competition in the relevant market. Mr. Zuckerberg may be a household name, but he is also the key witness for each of the central issues in this case," Dorsney said in a filing late last year in which he asked Stark to order Zuckerberg to testify.

Facebook said the founder and CEO was not a central figure, arguing that "to the extent Mr. Zuckerberg participated in the decision-making of the Credits team, his views were shared with and discussed among a much larger group."

The roots of the case go back to when most users didn't access Facebook through a smartphone app, and when Facebook was in a battle to stave off Google's social media offering, Google+.

At the time, Google was seeking to attract an audience for its nascent social network by grabbing a piece of the social-gaming-app audience that Facebook had built up for then-popular games such as FarmVille.

While Zuckerberg had promised game developers they could keep the revenue from applications they built for Facebook's online platform, he later went back on that pledge, Social Ranger alleges. Zuckerberg decided to monopolize the market for virtual currency as he blocked Google+ from providing a competing platform for game developers and virtual-currency providers, according to Social Ranger.

"Mr. Zuckerberg personally promised developers that they could 'keep all the revenue' from applications built on the platform," Dorsney wrote in the partially redacted public version of a November 8 letter filed with the court. "A year later, Mr. Zuckerberg came up with a plan to monopolize the virtual-currency market."

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