Mate,
They must change it for another Unreal 3 at least if its busted. You need to tell them to try and install the game themselves, if its not working there its not your fault and they need to change your copy for another one.
I had the same situation with my first HL2 cd. I installed it and when I started it it told me the cd key was already in use...
I went to the shop and explained them the situation. They were reluctant to change it as it was the same policy (no one believes as they think you may have copied it...) but after some scandal they changed it... twice... lol
The second copy they gave me had the exact same problem... so u can imagine a VoGon being mad...
But start out nice and try to explain them the issue, ask them to try and install it on one of they pcs to test, if it woks there then there is something wrong with ur pc, if it doesnt then you need to make them see its really busted.
And if u need help on braking the guys ankles... let me know
Behave!