Locations
On 12 April 2013, the UK Office of Fair Trading announced that it was launching an investigation into whether some "free" web and app-based games that encourage in-app purchases may violate laws protecting consumers from unfair trading practices, especially when aimed at children. The OFT is concerned that "children and their parents could be subject to unfair pressure to purchase when they are playing games they thought were free, but which can actually run up substantial costs". It’s the first time an EU consumer protection regulator has examined online games in this way and its outcome could have a global impact.
What happens next?
As part of its investigation, the OFT has written to several developers and publishers in the online and mobile games market that use the free-to-play model. It will be conducting interviews with those companies as well as considering the views of parents and other stakeholders, before releasing a report on its findings in October 2013 and deciding whether to take any enforcement action based on the evidence it has gathered.
What is the OFT looking for?
The OFT has made it clear that it is "not seeking to ban in-game purchases" but wants to ensure that children and their parents are protected from potentially unlawful practices when using free-to-play games. The main UK legislation the OFT will refer to is the Consumer Protection from Unfair Trading Regulations 2008 ("2008 Regulations"), which implement the EU's Unfair Commercial Practices Directive in the UK. Although each case will differ, the key factors the OFT will focus on in deciding whether a game has been marketed or sold in a way that falls foul of the 2008 Regulations include:
- whether children have been targeted and strongly encouraged to make an in-app purchase or persuade a parent / adult to do so for them; and
- whether the information given to users at the point the app is downloaded or accessed is transparent as to the true costs of playing the game.
The OFT will also be looking more broadly at whether the free-to-play model for games is generally misleading, commercially aggressive, or otherwise unfair.
Conclusions
It's unlikely that the OFT's investigation will lead to any proposals to change existing regulations, but the regulator has made clear that it will not shy away from taking direct action against the worst offending publishers or developers if necessary. Whilst it can publically censure companies (which can cause significant reputational damage), the OFT cannot impose civil or criminal penalties itself. However it can use the UK court system to do so and serious breaches of the 2008 Regulations can lead to a large fine and even a jail sentence. The OFT is also likely to collaborate with other regulators, such as the Advertising Standards Authority, to enforce industry codes where needed and to raise public awareness of this issue. Other EU regulators will no doubt be watching closely and may well follow suit by scrutinizing the online games market in their local territory more closely or by stepping up enforcement action.
Pending the outcome of the investigation in Q4 2013, the increasing number of companies with games that include in-app purchases or microtransactions should consider how transparently they communicate cost information to customers and would be well advised to steer clear of targeting children directly to make in-app purchases altogether.