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The onslaught of regulation against games and esports | Opinion

Legal experts at Reed Smith reflect on the scrutiny the industry is under, and how the European Esports Federation might offer hope

As political discord across the EU continues to rumble, earlier this year 12 national esports federations concluded a series of meetings with the announcement of a new 'European Esports Federation' ('EEF').

The EEF has enshrined many of its aims in The Berlin Declaration -- a short but ambitious document, which explains how the EEF views itself as a 'moderating partner' for the industry, rather than a governing body. It aims to promote "conscious, responsible, sustainable, healthy and value-based development in esports" and seeks to uphold "the values of dedication, commitment, respect, fair play and personal and structural integrity."

The EEF has been formed at a time where there is no shortage of legal challenges facing the gaming and esports industries, which is attracting further regulatory scrutiny as growth in the sector continues to soar. Paying attention to their recommendations, as well as the ensemble of new and incoming EU regulations, is therefore a crucial requirement for all in the gaming industry.

Protecting the consumer

The Berlin Declaration echoes many of the themes present in the current EU regulatory activities, in particular emphasising the importance of citizens' consumer rights.

Nick_Breen

Nick Breen, Reed Smith

This follows a new draft EU directive currently working its way through the legislative process, which is set to have a significant impact on the video games industry in one way or another. For example, one of its new proposals introduces the power for national authorities to impose fines of up to 4% of the trader's turnover for widespread cross-border consumer law infringements.

Although the directive is still some way off, the video games industry has already been caught in the crosshairs of national consumer rights authorities. This year, the UK's Competition and Markets Authority announced that it is investigating various video games companies' consumer practices and particularly the auto-renewal policies of these companies' online subscription offerings.

Although the CMA has not suggested that these companies are not compliant, the practical impact of this is that we are likely to see a number of video games companies overhaul their terms and conditions, refund policies, auto-renewal processes and user journeys in the next year or so.

The key to compliance with the majority of consumer law has always been transparency. The changes we can expect to see are clearer messaging to consumers on their cancellation rights, more regular reminders of when a subscription will be renewing and simple, and easy-to-read terms and conditions. With the proposed substantial fines looming in the near future, the stakes for non-compliance with consumer law has never been higher.

A Duty of Care

"With the proposed substantial fines looming in the near future, the stakes for non-compliance with consumer law has never been higher"

From a policy perspective, the UK government has recently taken a particular interest in the impact of video games on young people. The Digital, Culture, Media and Sports committee has launched an inquiry examining the development of immersive and addictive technologies such as virtual and augmented reality.

The inquiry will consider a variety of issues, including the connection between gaming, gambling, and social media addiction. With mental health and corporate social responsibility being two topics constantly in the headlines in recent years, it is fair to assume that the inquiry will receive a great deal of attention and could lead to important changes for the industry.

This inquiry has taken place concurrently with the government's publication of its 'Online Harms White Paper' which has been released for consultation and proposes the establishment of new laws which would have significant consequences for online platforms. In particular, the paper proposes establishing in law a new duty of care towards users, which will be overseen by an independent regulator armed with enforcement powers.

Although at this stage it is not clear what practical consequences these government initiatives will have for the video games industry, they point to a clear direction being taken towards increased regulation and government oversight.

Intellectual Property

Hunter_Thomson

Hunter Thomson, Reed Smith

The Berlin Declaration sets out the EEF's appreciation towards the ownership of intellectual property and respect for the "the rights bound to it."

Those active in the games industry, and particularly the esports industry (such as players, organisations, sponsors, and other stakeholders) will be closely monitoring how the new body pursues its lofty aims of promoting the "commitment towards a responsible use of such rights" given the myriad options now available to creators and content providers to monetise and exploit such rights.

For example, the first person to reach one million followers on the popular games-focused livestreaming website Twitch.tv was Tom 'Syndicate' Cassell, back in 2014, now has over 2.6 million followers and nearly 10 million subscribers on YouTube. His content is generally monetised via the serving of advertisements to viewers, which involves a complex web of intellectual property rights.

Whilst in the UK the creator of a video will generally become the first owner of the copyright in that video, these rights will need to be considered in light of the recent introduction of major European copyright reforms that will impact all entertainment and videogame industries.

Copyright can be used both as a sword (by granting others a licence to exploit the video) and a shield (by invoking certain rights to prevent unauthorised use). It provides a wealth of legal and commercial options to esports players, gaming personalities and esports organisations to protect their brands and diversify their revenue streams.

Further, particularly valuable and original signs (such as a logo or catchphrase) may also be registered and protected as trade marks. Understanding these rights can help would-be infringers avoid costly legal actions, and can help players and content creators unlock the value of their products.

Conclusion

The EEF has a broad range of issues it may consider addressing in its capacity as an esports moderating partner. Other than those we have already discussed in detail, these include the ongoing debate surrounding the murky relationship between video games and gambling (such as whether 'loot crates' constitute gambling and the issues surrounding the proliferation of betting with valuable in-game assets); advertising, influencer, and sponsorship issues; the enforceability of contracts with minors; players' employment status; and immigration.

Over time, we might expect to see the EEF provide advice on (and intervene to moderate disputes relating to) any number of these regulatory, legal, and commercial issues. While such a body would be welcome in principle, time will tell whether the EEF is able to muster the expertise and resources necessary to achieve the admirable goals set out in The Berlin Declaration.

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