By Pieterjan Declerck
After a hearing in the EU Parliament on 18 January 2023, a new Resolution on Consumer Protection in Online Videogames was adopted. Aside from a rather exploratory and superficial Communication by the EU Commission in 2008, the topic of player protection in the videogame environment was not tackled at the EU level until recently. Even though the EU published a report on loot boxes and included references to the videogame environment in recent policy documents, an integrated approach has not yet been brought to the table. As such, this Resolution could be seen as an important first step in the EU’s planned harmonised approach to better protect and empower videogame players, especially children, as well as to raise their awareness on videogame monetisation strategies.
This blogpost aims to shed more light on the new Resolution, which illustrates the potential for the EU consumer protection framework to serve as a meaningful framework of protection for certain practices in the videogame environment (see also this Gam(e)(a)ble report for a discussion of consumer protection regulation – as well as other regulatory domains – for gambling-like elements in videogames).
Videogame monetisation covers a wide array of concepts. These include microtransactions and (randomised) in-game purchases, manipulative and persuasive design mechanisms (“dark patterns”), or personalised microtransactions. Children, who are avid videogame players, are seen as vulnerable consumers in need of a high threshold of protection under EU law. As such, the Resolution aims to offer insights on how to bolster the protection of consumers, including children, in online games as a means to tackle these risks and harms. The remainder of this blogposts summarises what, in my view, are the key takeaways of the Resolution regarding videogame monetisation.
(i) In-game purchases
For in-game purchases in general, the Resolution calls upon the videogame industry to better comply with the existing information obligations under the current EU framework. For example, information about (randomised) in-game purchases should be clearly displayed and easily understandable for all consumers before the purchase of the game and before each in-game purchase. In addition to this general obligation, a number of specific topics are addressed.
First, the Resolution calls upon the Commission to explore the potential for a harmonised approach on loot boxes. Loot boxes are not defined in the Resolution. As one of the most commonly known mechanisms of videogame monetisation, loot boxes can broadly be defined as virtual items purchased by players to obtain randomised in-game rewards of varying value (e.g. cosmetic items or upgrades). In one of its – in my view – most important provisions, the Resolution calls for greater transparency from videogame developers on the probabilities in loot box mechanisms, including information in plain language about what algorithms are trained to achieve. This transparency discussion refers to the oftentimes insufficient or lacking explanation regarding the respective chances to obtain different virtual items through loot boxes in games, where on many occasions no information is provided on how the algorithm generates the outcomes of loot box openings and whether these outcomes are ‘dynamically generated’, meaning that the chance-distribution can vary over time.
Second, when videogames use virtual currencies, the Resolution states that their real-world value should be clearly and prominently indicated to consumers. Here, it is my belief that additional efforts could have been required: not only the real-world value should be clear, also the valuation of different virtual currencies in the same game vis-à-vis each other should be made clearer to consumers. This refers to videogames that deploy more than one virtual currency and where these currencies can be interchanged to obtain in-game content. It is also applicable to games that use a virtual currency which can be obtained both through playing the game and through direct purchase, thereby mixing ‘freely obtained’ currency and ‘bought’ currency, ultimately potentially confusing players regarding their respective valuation.
Third, the Resolution confusingly refers to situations where third-party websites enable players to exchange virtual items or currencies for real money and vice-versa. Whilst not requesting specific action on this matter, the Resolution does call on national consumer protection authorities to “put an end to illegal practices allowing anyone to exchange, sell or bet on in-game sites”. It should be noted that if the concept of ‘in-game sites’ is a criterion, third-party websites seem not to be included under the scope of this provision (they are not strictly ‘in-game’), even though it is usually specifically these third-party websites that are not recognised or supported by videogame companies and where the illegal practices take place. Therefore, more pragmatically, ‘illegal practices’ should have been classified as including unrecognised third-party websites, as well as any practice in videogames which would constitute a violation of consumer protection law. Further clarity on which practices are covered by this Resolution point will be needed.
Fourth, the Resolution tackles videogames which rely on a subscription-based business model to generate revenue. In particular, the Resolution seeks to end the practice whereby these subscriptions are automatically renewed without players’ knowledge or consent. It calls on the Commission to introduce an obligatory opt-in mechanism for subscription renewals instead of the current ‘renewal-by-default’ approach.
Fifth, the Resolution states that the EU’s return and refund policies also apply to online and digital content, and that consumers have the right to return and ask for a refund for online purchases as they have for in-person (‘offline’) purchases. This provision is remarkable because the terms of use of many videogame companies state that virtual content is only licensed to users and that there is no transfer of ownership (see Gam(e)(a)ble report p. 103-106). In other words, if users do not ‘own’ the virtual content after purchase, are they then still allowed to ask for a refund? In that regard, when purchasing virtual items or currencies, videogames may present the player with a mandatory ticking box which has them waive their right to withdrawal or to a refund. As the current legal status of virtual goods and currencies remains unclear, a more in-depth analysis of EU (and national) contract law is required to assess whether such practices are legal under the current framework.
(ii) Manipulative practices and children’s rights
The Resolution confirms that many practices exist in the videogame environment which may be deceptive, manipulative or persuasive and which may ultimately cause consumers, especially vulnerable consumers such as children, to take transactional decisions they would otherwise not have taken. This is a direct referral to the Unfair Commercial Practices Directive, which prohibits commercial practices that distort consumers’ behaviour by influencing their decision-making.
The Commission is implored to further research different practices and strategies in the digital (videogame) environment that may be harmful. Additionally, national authorities are called upon to effectively enforce EU laws (e.g. the Omnibus Directive, the Unfair Commercial Practices Directive or the Digital Services Act) that prohibit certain dark patterns, aggressive marketing practices and misleading transparency on information that is required to be provided to consumers.
Related, the Resolution states that videogame companies oftentimes have access to vast amounts of personal – sometimes sensitive – data of their players: if user profiles are created using behavioural data, these should not be used for manipulative and discriminatory practices. In my opinion, should this Resolution point be enforced effectively in practice, it could provide (in part) a solution to personalised offers of (randomised) in-game purchases that are aimed at hooking players to spend more time and money in the game.
In general, the Resolution highlights the importance of children’s rights ‘by design and default’ in the videogame environment (see Gam(e)(a)ble report p. 14-45 or the extensive summary for a more detailed description). Specific focus on children’s rights in the digital environment is already made one of the priorities in the EU, for example in its Strategy on the Rights of the Child and its updated Better Internet for Kids Strategy. In that regard, the Resolution calls upon the Commission to explore the possibility of requiring providers of videogames that are directed towards children to develop child-rights-impact-assessments based on the ‘4C-classification of risks’ (content, contact, conduct and contract), in order to mitigate risks to minors’ rights.
(iii) PEGI system and other tools
Complementary to the consumer protection framework, the Resolution acknowledges that the videogame industry can also enhance player protection through its own initiatives. Examples include developing tools that enable parents and players to limit money and time spent in games, tools to enable content-filtering by age (see also ‘age-appropriate design’), or tools to better inform players about their security and privacy settings.
PEGI is a self-regulatory organisation in Europe that provides age ratings and content descriptors for videogames (the ESRB is its equivalent in North-America). The Resolution states that whilst PEGI has useful content descriptors (e.g. the ‘In-Game Purchases: Includes Random Items’ descriptor) and useful information on recommended age for playing games, additional measures are needed to ensure the highest level of consumer protection.
Indeed, preliminary research results illustrate that the PEGI system may not always be reliable regarding the provision of information on loot box presence, or that current loot box warnings are ineffective to inform consumers. Therefore, when the Resolution calls on the Commission to explore the potential of PEGI to become the mandatory standard throughout the EU, addressing the shortcomings of the present system before its implementation is considered would be appropriate. In this regard, one of the key aspects to increase the effectiveness of self-regulatory initiatives is to enhance awareness of parents, children and other involved actors regarding their existence. For this, the Resolution calls upon industry to carry out awareness campaigns and support on the use of these tools and information. One such awareness campaign in Europe has already been launched and, more generally, the overall awareness of parents of how they can manage their children’s playing time and expenditure in games is relatively high in Europe. In my opinion, the foundation established by the PEGI system can serve as the basis for an EU-wide approach if these issues are tackled. In practice, this would result in a blend of governmental legislation and self-regulatory initiatives, thus ensuring a high level of consumer protection across the EU when enforced properly.
In conclusion, this Resolution can be seen as a well-founded first step towards a harmonised EU approach on consumer protection in videogames. Although many good points have been included, it is also necessary to acknowledge that an EU Resolution is not binding and that therefore the effectiveness of its provisions will depend on the next steps regarding their implementation and enforcement. Additionally, even though the Resolution is about consumer protection, it is clear that many other legal domains are relevant to the interpretation of its provisions, such as contract law, platform-regulation and children’s rights. It will be interesting to see how these different regulatory initiatives and instruments interact in the videogame environment. Similarly, we will have to wait and see how the discussion on the different topics highlighted in the Resolution will evolve and, potentially, influence the regulation of videogame monetisation.