Regulation of online and app-based games: An update from the UK

August 4, 2015 Leave a comment
On 30 January 2014 the UK Office of Fair Trading (OFT) published the final form of its Principles for online and app-based games. These Principles can be found here. Games businesses then had until 1 April 2015 to bring their operations into compliance with the Principles. (As it happens, 1 April 2014 was also the date when the OFT was replaced by a new agency, the Competition & Markets Authority (CMA)).

During the OFT’s investigations that led to the Principles, the OFT identified a number of practices that it felt were not compliant with applicable laws and regulations. So as 1 April came and went, what happened?

The world after 1 April 2015

We understand that the CMA looked again at some (and possibly all) of the games that the OFT had reviewed during its investigation. The CMA found that quite a lot of progress had been made, particularly around the use of the word “free”. However, it seems that the CMA also found examples of continuing poor practice including:

  • Free trials being presented as free games in their own right (for example so that players lost all gains after a set time unless they subscribed).
  • Deliberately frustrating free play experience (for example games with long wait timers during which a player is unable to do any other activities in the game).

So there was a strong expectation that the CMA would begin to take some enforcement action. The way that the enforcement process works is that the CMA publishes a no-names public notice that it has opened an investigation and at the same time sends private letters to the companies concerned requesting undertakings from them. If the games remain non-compliant, then there would be the possibility of court action. However, it was likely to take a while before anything happened.

In the meantime…

While we all waited for possible news of CMA enforcement action, another regulator decided to intervene. The Advertising Standards Authority (ASA) (which is the UK’s independent regulator of advertising across all media) investigated two app-based games; Dungeon Keeper from Electronic Arts (in July 2014) and Littlest Pet Shop from Gameloft (in December 2014). These investigations focused on issues covered by the Principles. In the case Dungeon Keeper the issue was whether the advertising was misleading on the basis that gameplay was severely limited unless in-app purchases were made; in Littlest Pet Shop the issue was whether the game contained direct exhortations to children buy products. In the case of Dungeon Keeper the complaint was upheld and in the case of Littlest Pet Shop it was not.

And then the CMA took action (of sorts)

On 4 June 2015 the CMA announced that it had taken action in relation to three (unnamed) online games. However, rather than taking any action itself, it referred the games to the ASA for the ASA to consider whether to launch investigations. The announcement is here. Interesting (and less well publicised), on the same day the CMA also announced that it had concluded its work monitoring the children’s online and app-based games market; along with the referral of three online games to the ASA, its final act was to publish a short guide providing advice to parents and carers about these games (which is interesting in itself as it has often been pointed out that at least part of the problem is the lack of understanding of these games by parents and carers). That announcement is here.

So what now?

The CMA’s announcement looks fairly final so it seems very unlikely that we will see the CMA take enforcement action in relation to online and app-based games, unless perhaps there is a really egregious example of bad practice. And perhaps we should not be too surprised at the CMA’s announcement – after all, this is the regulator charged with covering a wide range of complex issues, including unlawful pyramid schemes, pricing at supermarkets, mergers between the likes of BT and EE and various anti-competitive practices. The potential significance and damage of these kinds of matters put the frustration that long timers in app-based games may cause into some perspective.

So what have the Principles achieved?

The answer is probably a lot more than might at first sight appear. Although the CMA never took any enforcement action and its jurisdiction is confined to the UK, it is clear that the Principles have played a significant role in shaping the thinking of publishers, platforms and regulators throughout Europe and beyond. A number of practices have stopped and others have changed and the economic model for online and app-based games targeted at very young children has probably shifted away from a free to play model to a pay for download (or subscription) model.

And finally

Although the gaze of the CMA may no longer be on this area, one should not underestimate the power of the ASA. Although it does not carry criminal sanctions, the ASA does have a range of very effective measures to procure compliance. It is also fairly agile in commencing investigations and overall is probably much better suited to police this area than the CMA. The investigations into Dungeon Keeper and Littlest Pet Shop were each taken on the basis of just one consumer complaint and if an investigation is commenced, it needs to be responded to with great care.

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Paul Gardner

Paul Gardner

Partner at Osborne Clarke
Paul is a Partner in OC's commercial group and specialises in commercial transactions and regulatory issues relating to the crossover of technology and entertainment.

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