By: Max Metzler
A common theme on this blog is that the video game industry, as it expands further into the mainstream, seems to be constantly finding its way into new legal territory where its unique characteristics pose challenges to well-established law. The latest entry in that category: can a game miss expectations so broadly that it constitutes a securities law violation? That question may soon be answered as EA has been sued by a class of plaintiffs who claim that EA misled the investing public about the quality of their games–and their associated profits.
It’s the wide consensus that Battlefield 4 was not a very good game, especially at launch. Plagued by EA’s now-famous server issues and general quality concerns, the game was not as well-received, and did not sell as well, as expected. This is a common issue in video games; sometimes it just doesn’t work out. However, when you’re a massive, publicly-traded company like EA, there are extra concerns.
Namely, securities law requires companies not to mislead the public about the quality or outlook of the company. Such misleading statements can result in a 10b-5 action for securities fraud. There are many issues at work here, and the general headline in the media is perhaps a bit more dire-sounding than it should be (for example, mere “puffery,” or rosy statements about a company’s prospects, is not actionable, and that’s arguably what happened here). Also, it’s important to note that it was a law firm that got the ball rolling on this action, with the filing firm soliciting potential plaintiffs for the suit, though this is a common practice.
We will continue to follow this suit as it develops. What do you think? Should companies be held liable to their investors for statements made about individual games? Let us know in comments.