Los Angeles — With the rise of popularity comes animosity! Internet’s much-hyped social networking giant Facebook Inc. was sued by Austin, Texas-based Kickflip Inc., which does business as Gambit, claiming that the social media giant violated antitrust laws in the social gaming currency market with its entry into the sector and resulting terms, according to a Bloomberg report.
Digging deeper into the issue is a notably, if controversial, aspect of many social games is a virtual currency that users can either buy with cash or opt-in to advertising programs. Also, there is a considerable market for digital sheep that eventually cost players real-world money. To service this market, a number of virtual currency and payment-processing providers cropped up to work with developers and implement these aspects.
Initially, when Facebook entered into social gaming domain, it used outside companies to provide access to virtual currency to developers. What this did was allow developers to make money off of their games by having users pay real dollars to buy virtual coins. Prior to 2009, social game developers on Facebook had access to 20 virtual-currency service providers, including Gambit, the complaint says.
Surprisingly, Gambit was the most distinguished virtual currency and payment–processing provider to numerous software developers that published games on Facebook and other social networks.
Then, in 2009, Facebook changed course by introducing Facebook Credits, its own line of virtual currency. Developers were from then on forced to use Facebook Credits exclusively, Kickflip says, and Facebook began taking a 30% fee from each developer. Gambit, and the other virtual currency providers, were all a target of “blacklisting” by Facebook, the company said.
In addition, these credits can then be used on hundreds of games and apps available on Facebook, such as Farmville, and be spent at select retailers, like Target.
According to Bloomberg reports, Facebook’s decision in 2009 to offer its own services to developers destroyed a “vibrant and competitive market,” lawyers for Kickflip said in court papers made public today in federal court in Wilmington, Delaware.
“Facebook leveraged its dominance in the social-game marketplace to control and dominate the separate market for virtual-currency services,” Kickflip lawyers said. “As the result of Facebook’s actions, Gambit’s business was destroyed.”
The despondent Kickflip, based in Austin, Texas, is asking a judge to bar Facebook from enforcing its policy and award unspecified damages, according to the complaint.
But according to Businessweek reporting that social media giant claims, the complaint “is without merit,” Andrew Noyes, a spokesman for Menlo Park, California-based Facebook, said in an e-mailed statement. The company plans to defend the claims, Noyes said.
The case is Kickflip Inc. v. Facebook Inc., U.S. District Court, District of Delaware (Wilmington).