Electronic Arts is preparing for court once again. On Tuesday, law
firm Robbins, Geller, Rudman and Dowd filed a class action lawsuit
against the publisher on behalf of investors who bought stock in the
company between 24 July and 3 December. The suit
alleges that EA violated the Securities Exchange Act of 1934 by
allegedly providing "materially false and misleading statements" about
military shooter, Battlefield 4. Before the release of the game,
Electronic Arts issued strong fiscal guidance to investors, based on the
"purported" strength of the latest Battlefield title. "The price of
Electronic Arts’ stock steadily climbed on these statements," reads the
law firm's statement, "reaching a Class Period high of $28.13 per share
by August 23, 2013 and allowing certain of Electronic Arts’ senior
executives to sell their Electronic Arts stock at artificially inflated
prices."
However, after the launch of the game on 29 October – but most
obviously following the arrival of the PlayStation 4 version on 15
November – there have been numerous problems with the software,
especially its online multiplayer component. Hundreds of players hit
game forums and news sites complaining that they were unable to connect
or were being continually booted from servers. Earlier this month
developer EA DICE announced that it would put all other development projects on hold until the issues with Battlefield 4 had been resolved.
The lawsuit goes on to point out that after EA's announcement stock
value fell, closing at $21.01 on 5 December, "sending the share price
down more than 28% from its Class Period high".
The allegation, then, is that Electronic Arts executives raised expectations about Battlefield 4 in October knowing that the game was "riddled with bugs and multiple other problems".
The lawsuit alleges: "With an inflated share value, senior execs were
then able to offload shares, selling more than $13.2m of stock at
fraud-inflated prices." "Meritless action"
In a statement issued to US games site Polygon,
Electronic Arts has said: "We believe these claims are meritless. We
intend to aggressively defend ourselves, and we're confident the court
will dismiss the complaint in due course."
So is this a meritless case? "Robbins, Geller, Rudman and Dowd
handled the Enron class action," says Alex Tutty from UK law firm
Sheridans. "They are a securities law firm, this is what they do. The
firm obviously believes there is a case to answer, and in order to take
it forward they need to find a plaintiff – someone who has suffered
financial harm in this period due to purchasing shares on the basis of
the statements made.
"This is a problematic case, and it doesn't look good for EA, simply
from a PR point of view. Looking at the fact as presented by Robbins,
Geller, Rudman and Dowd, there does seem to be a case to answer.
However, we've only seen one side of the argument. Companies do give
this sort of guidance, and it is important to be accurate, but it is
just guidance based on what they know at the time. You'd have to prove
that they knowingly gave false information, and it would be difficult to
know about all the bugs that would crop up on the PlayStation 4
version. EA can probably produce a lot of evidence to suggest they
didn't perceive the extent of the problem, or didn't have sight of it
until after launch."
Robbins, Geller, Rudman and Dowd now has until February to find a
lead plaintiff – if it succeeds, court beckons. In the background,
Battlefield 4 has not performed as well as its predecessor at retail – according to industry news site, MCV,
UK sales are down 69% compared to Battlefield 3. However, several
Triple A franchises, including Assassin's Creed and Battlefield's rival
Call of Duty have found the transition from current consoles to the
next-gen machines difficult, with sales down across the board.
Whatever the case, this lawsuit has the potential to set an
interesting precedent in terms of publisher culpability for problematic
launch software. Several major titles have similarly suffered from bugs,
glitches and server failures this year, including Diablo III and GTA
Online, the multiplayer component of Grand Theft Auto V.
This is not the first potentially expensive legal action EA has had
to contend with. Earlier this year, the publisher settled on a lawsuit
filed against Zynga for copyright infringement concerning the latter's
game, The Ville. And in 2012, EA also settled on a complicated lawsuit with Activision
over the departure of game developers Jason West and Vincent Zampella
from the Activision-owned Infinity Ward to the EA-published Respawn
Studios.
