Irritating your customers may be bad corporate practice, but it’s not illegal and won’t earn you anything worse than a golden poo or two. Irritating your stockholders, on the other hand, can indeed earn you a trip to court.
EA is being hit with a class-action lawsuit alleging that the way it hyped up Battlefield 4 prior to launch is a violation of the Securities Exchange Act, Polygon reports.
The problems with Battlefield 4 have been widespread and well-documented since the game was released in October. The game was broken for many players, who found their save files being corrupted, their games crashing, and even their systems crashing repeatedly, across all platforms. Occasional bugs in a game are nothing new, and generally tolerated by players, but the issues with Battlefield 4 have been widespread and prevalent, to the point where EA postponed their expansion pack plans to spend their time patching in fixes to the core game instead.
The full complaint (PDF) claims that because there was no possible way EA could be unaware of the scope and severity of the bugs in their product prior to its release, the statements EA made to investors in July about their financial forecasting for the holiday season were “materially false” and intentionally misleading. The suit alleges that because of those statements, EA’s stock was artificially inflated for a period of time. Then once the reality of the game’s quality became widely known in November and December, the stock price dropped back down.
Game publishers and other media companies are of course wrong all the time about how popular their major, expensive, blockbuster projects will be. Movies flop, games tank, and books languish on shelves. The key issue in the lawsuit is who makes or loses money when these things happen. According to the suit, the temporary bump in stock price was extremely beneficial to executives at EA: “[W]ith the price of the Company’s stock artificially inflated based on defendants’ false and misleading statements, certain of Electronic Arts’ senior executives cashed in, selling more than $13.2 million of stock at fraud-inflated prices” (emphasis in the original).
Lying outright to your stockholders about your upcoming products is, of course, illegal. Doing your best in good faith and failing anyway is not. The suit rests on the concept of “what did they know, and when did they know it,” arguing that executives who gave stockholder forecasts and financial reports were aware that their rosy holiday 2013 outlooks were bunk when they were delivered.