If this affected everyone in Germany regardless of where they purchased the game I would have said it was a mistake on Valve's end. A mistake they've made before in Japan with Homefront.

In the case of Homefront Valve incorrectly pushed the Japanese version to everyone in Japan regardless of whether they had purchased the specific Japanese version or not. But that was fixed around a day later. The Japanese version, for the record, is not even available for purchase on Steam, only from the Japanese distributor. It differs from the version sold on Steam in Japan in that it has the cuts and name changes made for the console release as well as restricting online play to Japanese servers only.

In this case, you might want to track down the app id of your specific version to ensure you did actually purchase an uncut copy. Then, if you did, and the cuts still exist, contact support to see what they have to say.

Your perspective seems to be "because I can circumvent it this horrible law is not a problem. It's Steam's fault for not allowing me to circumvent it."

I think that is a silly perspective. The root problem is your government.

What he's describing has absolutely nothing to do with "circumventing the law".

You seem to be misunderstanding. I'm not circumventing anything. The sale of uncut versions is perfectly legitimate and is standard practice in Germany. Many independent games stores even have a separate "18 or over" section that only adults are allowed to enter, and these sections contain all of these uncut versions. Much like the porn section of a video rental store in the US.

The sale of the uncut version is still allowed. The OPEN marketing of them is not allowed. What retailers in many cases do is set up a means of ensuring that minors do not see these games, either by keeping them in a box or crate behind the sales desk and producing it on request, or have a seperate room as stated above.

Ah, the blessings of Steam.
You're way better off without that intrusive piece of software. Just put your money where you mouth is, and don't support activation and DRM dependant software.

Done with pc gaming? - I don't think you have to take it that far. Eventually more games without drm will emerge, and besides that, you always have gog ;)

I've just got off the phone to the store where I bought the game from, and predictably, they've said that I need to contact Valve with the issue.

On a related note though, seems as though the store in question has now pulled all Steamworks titles off their shelves and has stopped selling them because they were getting too many complaints and their sale of them was presenting a liability problem.

And hosting/promoting the uncut versions on Steam is a grey area Valve doesn't want to fuck around in. The law is still the root problem.

I can't say it any clearer.

Hosting the uncut version is legal in Germany, since it's the same as having it in a special area of the store.
Promoting the uncut version in Germany isn't legal, but Steam isn't doing that, it is promoting the censored version.
If you get the uncut version from either an 18+ store, or by importing it, steam never promoted the uncut version, thus didn't break any law. You have bought the uncut version legally, and installed it legally. Then they tell you, "oh, sorry, you can't have this one, we are replacing your legally purchased item with another one".
On the other hand, I'm not a lawyer, so it might be a grey area as you say. I still find it wrong on Steam's part though.

FYI, using a VPN to bypass region restrictions and prices will get your account banned.

I think Steam forcing any version of any game on anyone is wrong. Can't stand it when a patch breaks a game and Steam is just like "oh wells!"

However the government issues are still the root problem. It amuses me that people bitch about stores more than the law behind the problem.

*Facepalm* You still aren't understanding the problem.

The law is not the problem. Millions of Germans and retailers within Germany have been handling the law here without too much incident for years. Those that wanted uncut versions, got uncut versions. On the consoles, those that want uncut versions, can still get uncut versions without issue. It's been happening for 20+ years and there's no legal circumvention or back-alley deals as you seem to be implying. Hell, I've even imported banned games from the US and all I had to do at the customs office is formally declare that the game was for personal use, pay customs duty and be on my merry way.

In fact, there never was a problem for PC gaming until Steam came along and unilaterally started to introduce region locking to PC gaming.

The problem is in Valve's/Squeenix's sloppy application of the law, probably decided upon by some corporate attorney in the US who doesn't have the slightest experience with German law and just relied on some sloppy English translation of the legislation.

Let me pose the question this way. Even if there is no grey area with this law and digital distribution services, even if Valve and others are being totally paranoid, isn't the censorship law STILL the root cause of ALL these issues?

You are an 18 year old in Louisiana. Your parents think you are old enough to drink a beer in your house, and the law does allow for this. You go to the fridge, and find that all the beer your parents have bought for you (again, legally) has been turned into orange juice. You legally acquired alcohol, you are in a place you can legally consume alcohol, but the alcohol you had available has been swapped. Is that a legal case or not?
P.S. I specifically mention Louisiana since I think it's legal in the case of private premises.

Not if it is being wrongly interpreted. There are dozens of laws and dozens of problems that arise due to incorrect application of the law. Doesn't mean the law is at fault. The one who incorrectly applies the law is at fault.