November 28, 2012

Virtual Currency Company Seeks to Make Facebook Pay With Antitrust Suit

Kickflip, Inc. has filed an antitrust complaint against Facebook Inc. in the U.S. District Court for the District of Delaware, alleging that Facebook unlawfully tied its virtual currency, Facebook Credits, to games available for play on the social network.

Virtual currency, which is purchased with real money or earned by viewing advertisements or completing tasks within a game, can be used to purchase virtual goods that enhance a gamer’s experience.  For example, in Zynga’s “Draw Something,” gamers “pay” for the bombs that eliminate letters in the letter bank.

Under Facebook’s July 2011 terms of service agreement, if a game developer wants to make its game available to Facebook’s users, it must use Facebook Credits as its currency provider.

Kickflip, doing business as Gambit, once provided virtual currency used for social games.      

According to the complaint in Kickflip Inc. v. Facebook Inc., since 2007 Facebook has allowed game developers to use application programming interfaces, or APIs.  An API gives the game access to a user’s social network so they can “cooperate or compete with their real-world friends with minimal effort spent signing up or connecting.”

The complaint alleges that after Facebook launched Facebook Credits in 2009, it charged game developers a commission 25 percent higher than competing rates, which originally led to few game developers using Facebook’s currency.  According to plaintiffs, however, Facebook then used one instance of a “scam” advertisement to treat Gambit and other virtual currency companies as a security risk to Facebook users, and imposed the requirement that game developers use Facebook Credits as their currency provider for games available to Facebook users.  

Kickflip alleges that by tying virtual currency to a social network of one billion users, Facebook is now leveraging its monopoly power to impose supracompetitive prices.

“To compete with Facebook’s Credits, a competitor must enter both the upstream market for social game networks and the market for virtual-currency services,” the plaintiffs stated in the complaint.

Kickflip is asking the court to bar Facebook from enforcing its policy and to award unspecified damages.

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Categories: Antitrust Litigation

    November 5, 2012

    Latin Music Promoters Allege Zamora Entertainment Drowned Out Competition

    Zamora Entertainment, a Latin music promoter, is facing an antitrust lawsuit alleging the company forced artists to use both Zamora venues and event planning services.

    Sol Entertainment and Hispanic Radio Broadcast Inc. filed the complaint in the U.S. District Court for the Southern District of Indiana.

    Sol operates Tropicana, a music venue in Indianapolis, and Hispanic promotes Latin music events for Sol as well as other smaller venues.

    The complaint alleges that anticompetitive behavior began in 2002, when Zamora purchased mid-size music venues in Iowa, Alabama, and Indiana.  Zamora then bought live music event space across 14 other states.  Once Zamora had secured the venues, it was able to schedule the artists it represents to perform at locations owned by Zamora.

    Allegedly, not only were artists using Zamora’s promotional services charged high fees if they wished to perform at venues owned by other companies, but Zamora also denied artists working with other promoters access to their venues.

    Plaintiffs allege that Tropicana’s business was restrained by Zamora’s tying of promotional and venue service in the music promotion market, in which Zamora was dominant.

    Tropicana is one of only two venues that can seat more than 1,500 people for Latin music events in Indianapolis.  However, over the past year, Tropicana hosted just two concerts with more than 1,000 attendees.

    Plaintiffs also argue that Zamora’s allegedly anticompetitive behavior has harmed consumers.  Ticket prices have increased from an average of $25.81 to $68.33 since Zamora allegedly acquired its monopoly.

    Plaintiffs estimate Zamora has gained a 90 percent share of the live event market for Latin music.  “Now that it has gained control of these markets, Zamora is seeking to expand its empire into the management of artists, the remote sale of concert tickets, the licensing and sale of concert merchandise and other ancillary business,” the complaint stated.

    Plaintiffs seek monetary awards for the damages, and an injunction prohibiting Zamora from continuing any anticompetitive behavior.

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    Categories: Antitrust Litigation

       






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