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Virtual Currency Company Seeks to Make Facebook Pay With Antitrust Suit

Posted  November 28, 2012

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.

Tagged in: Antitrust Litigation,