HomeInsightsQ&A – regulatory developments affecting the computer games industry

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These developments and the fact that they have arisen from different sources and over a relatively short period of time raises a number of questions. We highlight the key questions below, in each case with our brief comments on them:

What is driving these initiatives?

There are a number of disparate factors. In part games have been caught up in the wider concerns relating to technology companies and social media, including issues such as ‘fake news’ and the use of personal data. In addition, however, for the games industry it is perhaps an inevitable consequence of games becoming part of mainstream entertainment, the number of people now playing games of different kinds and the high profile of games such as FIFA, Candy Crush and Fortnite. In addition, it is also a consequence of the shift in monetisation models that have come with the move to free-to-play, and the spotlight on the games industry that has arisen from the (ongoing) issue of loot boxes (also now known as ‘surprise mechanics’).

These initiatives appear to overlap – is that right?

They do, and this is not surprising given the breadth of the issues that they cover. This point was made by the Information Commissioner, who has raised some concerns about the interaction (and possible overlap) between the proposed regulatory regime set out in the Online Harms White Paper and the work of the ICO. In her speech at the ICO’s Annual Data Protection Conference in Manchester on 8 April 2019 she said that the “ICO has a role to play here“.[1] In a separate statement, she said that the ICO has already taken action against online services and it took action when people’s data was misused for political campaigning.[2] The ICO has also published guidance to help individuals stay safe online and has recently run the consultation relating to the draft code on Age Appropriate Design. The overlapping responsibilities was recognised by the Online Harms White Paper and the report of the House of Lords Select Committee, which both recommend that a single regulator take responsibility for digital regulation in order to achieve a joined-up approach.

How significant will any potential changes be for games companies?

Potentially, they are very significant. The introduction of a statutory duty of care proposed by the Online Harms White Paper would be a material development. This can be illustrated by the fact that the English courts have indicated that they would be reluctant to find that an operator of a gambling service owed a general duty of care to a player. Indeed, the leading case in this area indicated that an operator would not even have a general duty of care to problem gamblers: “Recognition of a common law duty to protect a problem gambler from self-inflicted gambling losses would involve a journey to the outermost reaches of the tort of negligence in the realm of the truly exceptional.”[3]

Similarly, the impact of the code on Age Appropriate Design could be quite significant, and this has already been recognised by the Information Commissioner. When she and her deputy appeared at one the hearings in connection with the DCMS Committee inquiry into immersive and addictive technologies, Elizabeth Denham referred to conversations that the ICO has had with some games industry and observed: “That industry is quite concerned about our Code because it feels it will undermine or impact the business model of those games, through nudges and reward loops and the way those techniques are built into games.” However, she added that the ICO aim to “provoke better design by the companies in the context of children.”

Are these just issues for platforms?

Although these issues will be of particular importance and relevance for platforms, many also apply to game publishers. For example, a number of points go to game design and not simply how the game is provide and operated on a platform.

How likely is it that any of the proposals will come into effect?

Given the importance that the UKG and UK regulators place on this general area, it is unlikely that the progress of the measures outlined by the Online Harms White Paper will be materially affected by Brexit or indeed even by any potential change in the make-up of the UKG, should a general election occur this year.

Do these proposals only relate to the UK?

Yes. The proposed measures would (if introduced) only have effect on the activities of games companies in the UK. However, as the report of the House of Lords Select Committee pointed out, “although it may be difficult to prevent online harms which originate outside the United Kingdom, the law can still be effective in protecting victims within this jurisdiction.

However, the impact could come to be felt more widely. The UK has been more active than many countries in considering these kinds of issues. UKGs and regulators in other countries will undoubtedly have noted the Online Harms Whiter Paper with interest and it is quite possible that other counties could follow the UK in introducing similar measures. We have already seen this with other measures that have been introduced in the UK in relation to online activities (as, for example, happened after the UK consumer law regulator published its Principles for online and app-based games (which summarised the views of the regulator regarding online games and apps under UK consumer protection law).

Do any of these initiatives affect the legal status of loot boxes and other gambling related mechanics in the UK?

No, not directly. Representatives of the British gambling regulator, the Gambling Commission, appeared before the DCMS Committee and reiterated that a loot box will not constitute gambling where the ‘prize’ is an in-game item with no monetary value. However, they also made it clear that this is an issue that they are monitoring very closely, particularly the availability of secondary markets (where in-game items can be converted into cash) and the steps that games companies take to stop such markets. The Gambling Commission has also reiterated its concern at social casino games.

When Margot James MP (then UK Minister for Digital and the Creative Industries) appeared before the DCMS Committee she was asked a number of questions about loot boxes. Interestingly, she said that her principal concern about loot boxes is not the connection with gambling, but whether, “children or young people are spending money they don’t have in excessive quantities in order to make online or in-game purchasing.”

On this (and many related) issues, it is interesting to see what is happening in connection with online gambling. The Gambling Commission publishes an annual report that summarises the action that it has taken over the preceding year and also indicates how its approach is developing. It has recently published its Enforcement report for 2018/19 (see here) and one of several interesting points is what the Gambling Commission say about disposable income and ‘affordability’. Although this is made in connection with online gambling, there are clear parallels that can be drawn with in-game spending. For more on this issue see here and here.

Has the UKG taken a dislike to the games industry?

The combination of these initiatives (and particularly some of the comments and questions made by members of the DCMS Committee) may give the impression that the UKG has taken a dislike to the games industry. Indeed, when the CEO of the games trade association The UK Interactive Entertainment Association spoke on these issues at the Develop conference in Brighton in July, the title of her talk was: ‘Help! Games industry under attack!’.

However, the industry can take some heart at the words of Margot James MP before the DCMS Committee who provided a well informed, balanced and measured response to the questions raised. In particular, she made the point that the issue is not with the industry as a whole, but rather certain practices of some companies in the industry: “It’s like any industry. There are some companies who have this short-term view that the more time you spend on my [product], the more money I make. That is not true of all companies in the sector or indeed of any other sector. There are companies who have a longer term, more responsible attitude to their customer base compared with other companies who have a short-term and more aggressive commercial view of their user base. And the latter need to be brought into line.”

More generally, against the backdrop of Brexit, the UKG (whatever its future constitution) will well know that the creative industries need particular care and attention.

[1] https://ico.org.uk/about-the-ico/news-and-events/news-and-blogs/2019/04/data-protection-practitioners-conference-2019/

[2] https://ico.org.uk/about-the-ico/news-and-events/news-and-blogs/2019/04/ico-response-to-government-s-online-harms-white-paper/

[3] Lloyd LJ in Calvert v William Hill Credit Limited [2008] EWHC 454 (Ch)