Are your game monetisation techniques going to remain legal?

There has been a lot of activity recently from EU and UK legislators with each seeking to outdo the other with new laws being introduced at every turn. There is also increasing regulatory activity and enforcement relevant for the games industry, with consumer regulators building capabilities through investment into technology and staff.

It doesn't look like all this activity is going to slow down either, with potentially even more legal changes on the horizon and regulators gearing up to get even more involved.

A shake up in monetisation techniques might be needed to mitigate new risks from consumer law regulations

EU and UK consumer legislators are focused on the digital world, with the games industry at the forefront of the minds of regulators. Game developers and publishers should take stock of the position and react to make sure their monetisation techniques are compliant – or are likely to remain so with the upcoming changes.

In particular, regulators are being given new powers, fines are increasing hugely, and regulators are looking closely at subscription models and so-called 'dark patterns' in user interfaces.

A shake up in monetisation techniques might be needed to mitigate new risks from consumer law regulations, but there will also be opportunities for some companies to lead the way in shaping what best practices look like, winning player trust and loyalty along the way.

It's not just publishers based in the UK that need to worry either: as with GDPR, the consumer rules will apply to protect players in the UK and EU, wherever the relevant publisher of the game might be located.

So, what's new and what do you need to look out for?

• What consumer laws are new in the UK?
• What's new in the EU?
• What more regulation is on the way in the UK and EU?
• Key issues to review for your monetisation techniques

What consumer laws are new in the UK?

UK legislators have been slower than their EU counterparts in introducing new legislation in the consumer space. This might be because UK consumer laws are already fairly broad, and with regulator guidance, can flex fairly quickly to fit the evolving online world. For example, existing laws prohibit unfair or misleading practices which gives the Competition and Markets Authority a wide remit in determining what practices might be problematic.

But after a number of studies, impact assessments, and consultations, the UK government has seen fit to introduce the Digital Markets, Competition and Consumers Bill to Parliament.

The Bill was published on 25 April 2023 and introduced some radical new digital sector regulation to existing competition and consumer regulation – in particular, it will replace current UK consumer laws that control unfair practices. The Bill is currently only draft legislation and not yet an Act in law; as such, it is still subject to change, but it seems likely to be passed into law in substantially the current form within the next year.

From a consumer law and games industry perspective, the key points of interest are:

- New direct regulator powers and fines

The CMA will, for the first time, be able to award compensation to players who complain and will be empowered to directly impose financial penalties for breach of consumer protection laws. There are big potential fines on the table, in particular a headline-grabbing fine of up to 10% of global annual turnover (trumping the equivalent EU fines). This is a significant increase that, on paper, even exceeds the GDPR risk and should put this firmly on the agenda of every games business' board.

The Bill also contains provisions about alternative dispute resolution (meaning consumers will have greater ability to take action against companies) and would put the CMA's Digital Markets Unit on a statutory footing.

With such large fines on the table, not fully complying with consumer laws is no longer a manageable option. With the CMA also bolstering its resources, enforcement risks too will be higher.

- New rules on subscriptions

Subscription models will be far more regulated under the new laws proposed by the Bill, which includes new rules regarding subscriptions (and free trials) – more specifically in relation to subscription information, reminders, notices, and cancellation.

• Pre-contract information

There will be new, more detailed rules around pre-contract information, including giving consumers "key pre-contract information" which requires (amongst other things) giving information about any auto-renewal mechanism, the charges that apply after any initial trial period, the amount and frequency of payments, and details of how a player can terminate the contract.

• Reminder notices

For subscriptions where payment is taken every six months or more frequently, reminders must be sent at least once every six months. Reminders must also be given in respect of the first subscription renewal payment (no matter how often payments are made). For subscriptions where payment is taken less often than every six months, reminders must be sent just for each renewal payment.

These reminder notices must explain that a subscription contract will continue and that a renewal payment will be due unless the player takes steps to end it. The reminder notice must include the date the renewal payment is due and the amount the player is liable to pay, as well as details of any price increase compared to the previous payment and details of how the consumer can end the contract before becoming liable for the next payment. There are also detailed rules around exactly when these reminders must be given.

• Ending the contract

Cancellation must also be easy: a consumer should be able to end the subscription contract in a single communication without having to take any unreasonable steps to bring the subscription to an end.

• Cooling-off rights

Consumers will have new cooling-off period rights (i.e. the right to cancel without penalty for any reason during the "cooling-off period"). It will also be a criminal offence not to provide consumers with pre-contract information relating to these rights and company officers can be liable if failure to provide the information happens with their consent or connivance or due to their neglect.

So, if your game relies on any form of paid renewing subscription (or a free trial subscription followed by a paid subscription), you will need to update your practices to comply.

- New rules… later on?

It was anticipated that the Bill would include new provisions to prevent the publication of fake online reviews (similar to those covered by the EU's Omnibus Directive discussed below), which tend to be most relevant to games on mobile. The Bill does not include any provisions about online reviews but a government press release suggests that such rules may be introduced.

The Bill does include powers for the Secretary of State to add new unfair "banned practices" to the legislation, so we think we can expect some online review rules will be on the way.

There are also calls to introduce a collective redress regime for consumer protection cases under the Bill, as already exists for competition cases. While in its current form, the Bill does not include such a regime, interested parties should follow any revisions to the Bill closely to see where things land.

If this were introduced, it would provide a more effective means than is currently provided under consumer laws for a group of aggrieved players to bring a group action against a games company that is not complying with its obligations under the Bill.

What's new in the EU?

EU legislators fired the starting pistol on the consumer law arms race swiftly following Brexit with the introduction of the "Omnibus Directive" in January 2020. It's slightly old news now, but bears repeating given how it correlates (and in some ways doesn't) to the new UK DMCC Bill described above.

From a consumer law and games industry perspective, the key points of interest are:

- New powers and fines for EU regulators

Similarly to the new UK bill, the Omnibus Directive introduces big fines. Member States must allow businesses to be fined for certain widespread infringements. In most cases, the fines must be up to at least 4% of the trader's annual turnover in the Member State(s) where the breach occurred, or up to at least €2 million if turnover information is not available.

The Omnibus Directive also gives consumers a personal right of redress where they have been harmed by unfair commercial practices.

- New rules

The Omnibus Directive brought in a lot of new rules which, given this isn't hot of the press, we won't go into detail about, but at a high level, changes focus on online transparency with consumers.

Interestingly the Omnibus Directive brought in new rules not addressed in the UK bill, for example, around product ranking, online reviews (which was not included in the UK bill but which we expect will be addressed in the near future), marketplaces, personalised pricing, and price reductions.

Unlike in the UK, EU consumers have also been given collective redress rights under the new Collective Redress Directive, meaning it's likely we'll see more collective claims against traders failing to comply with EU consumer laws, although these are unlikely to be on the same scale as US class actions.

- New rules… later on?

Unlike the UK's DMCC Bill, the Omnibus Directive does not address subscription practices – although these issues are, to some extent, already captured by local laws and broader EU consumer laws.

However, EU legislators now seem to be regretting not including specific subscription rules in the Omnibus Directive and so, not to be outdone by the new UK bill, we think we can expect some more legal changes from EU legislators in relation to subscription practices (see below).

It's also worth mentioning the long-standing loot box issue which has been debated in the UK and other countries. The UK's working group on loot boxes recently published (via UKIE) its long-awaited 11 industry principles on paid loot boxes. The principles are voluntary, for now, but if there is not widespread compliance with them by the industry in the next year or so, then the UK government may finally legislate against them.

Until now, regulation on loot boxes has been regarded as a matter most relevant for gambling law. However, it is entirely possible that they might be dealt with under consumer laws instead and we would argue that this would be more appropriate.

What more regulation is on the way in the UK and EU?

UK legislators seem content with the new Bill for now, but I think we will see some new areas that the CMA will be scrutinising on the basis of existing broad UK consumer laws. One of these new areas looks set to be what the CMA calls "Online Choice Architecture," also known as "dark patterns," more broadly around the world.

Dark patterns are, in short, the design of a digital environment or user interface that can, either deliberately or unintentionally, lead players towards certain (harmful) decisions and actions. For example, if a player were to be pressured or misled into making an in-game purchase through a pop-up in the game, this could qualify.

The CMA has invested time and money into unpicking Online Choice Architecture issues with various discussion papers and evidence reviews. It has also issued an open letter to UK businesses setting out its "compliance advice" which focuses on harmful Online Choice Architecture.

So, although the UK's DMCC Bill may not include specific provisions regarding dark patterns or Online Choice Architecture, we can be fairly certain there will be regulatory action on the basis of current laws.

EU legislators are also concerned with manipulative online practices, but unlike the UK, the EU will be looking to specifically legislate against these practices. Dark patterns are already banned under the Digital Services Act (also known as the DSA), which will apply to many video games available to players in the EU; however, the EU may also look to extend these rules more broadly in the consumer law sphere in the future.

The EU Commission has now completed a public consultation on the "Fitness check of EU consumer law on digital fairness," the results of which suggest that dark patterns as well as subscription practices are top of the agenda for further legislative changes. 88.7% of the consultation respondents noted website or app designs were confusing or deceptive, and 69.4% of consultation respondents noted subscriptions were difficult to cancel.

Key issues to review for your monetisation techniques

So, a lot of legal change! But what, practically speaking, are the issues games developers and publishers should be looking out for? Here are just some of the questions you should be asking:

Fake reviews:

• Do you allow consumer reviews? If so, what do you practically do to make sure they're genuine?
• Do you have a customer/user review content moderation policy?
• Could your moderation policy skew positive and negative consumer reviews?

Online choice architecture/dark patterns:

• Does your game, website or app manipulate consumers? (This could be something as seemingly innocuous as font size or button colouring)
• Do you pressure or influence gamers into playing for longer or making purchases?
• How are games monetised and is it clear to consumers how this works at the outset?
• Is free-to-play content truly free?
• If you sell different products, how do you rank product listings?
• Where there are purchase options, is the UX clear or are there decoys, choice overload or sensory manipulation?
• How do you use virtual currencies?
• How do you communicate with users? Is it overly complicated or legal?
• How do you use prompts and reminders? Are they helpful or are they potentially pestering?
• Is your UX personalised in any way and if so, do consumers know?

Subscriptions:

• How do your subscriptions work?
• Are fees clear or are there "hidden" charges?
• Do subscriptions auto-renew? If so, how and when do you tell consumers?
• How do you use subscription reminders?
• How can users end a renewing subscription?
• What do you do about users that are paying for a subscription but haven't been active in a long time?

And the most important question:

• If you were the player, would you feel a little hard done by, confused or even manipulated when using the game, website or app interface?

There might not be a specific law to address the particular practice, but remember: consumer laws are broad enough to encompass all sorts of practices. There may be small changes you can make to bring such practices over to the right side of the law.

If you want to take a risk-based approach, this article should give an idea of where legislative and regulatory focus currently is; but do make sure to keep on top of how this changes, because games companies are really on the regulatory front line when it comes to consumer regulation.

Consumer laws are broad enough to encompass all sorts of practices. There may be small changes you can make to bring such practices over to the right side of the law.

The online regulation ecosystem is getting more and more complicated. The digital era has thrown up a lot of issues and legislators and regulators are rushing to fill the gaps. This article deals with just some of the recent consumer law changes, but there have been (and are going to be) further overlapping (but hopefully not conflicting) changes particularly from a data protection (e.g. the UK's Children's Code) and online safety perspective (e.g. UK's Online Safety Bill, which is currently working its way through Parliament, and the EU's Digital Services Act, which came into force in November 2022).

Legislators and regulators have, to date, not taken a very joined up approach, meaning that businesses in the games industry will need to zoom out and look at the full picture to work out what practical changes they need to make or risk getting into hot water – and no longer just from a reputational perspective, as there are now also very large fines at play.

Nick Allan is a partner at law firm Lewis Silkin, where he leads the Interactive Entertainment practice. He regularly advises games businesses on commercial, IP, and regulatory issues. Fleur Chenevix-Trench is a senior associate in Lewis Silkin’s Digital, Commerce and Creative team in London. She regularly works with clients in the media and entertainment sector advising on a range of commercial, consumer and regulatory issues.