What might EU consumer protection law mean for microtransactions?

The EU is taking action against games that push micorotransactions, and it may have a ripple affect that touches on microtransactions in games across the industry. The Consumer Protection Cooperation (CPC) Network, a group tasked with enforcing consumer protection laws in European Union countries, recently launched an enforcement action against Star Stable Entertainment AB stemming from commercial practices tied to in-game currencies within Star Stable Online. Ultimately, the CPC Network assessed that several Star Stable Entertainment practices violate consumer protection laws, specifically targeting children and pressuring them to purchase virtual in-game currency using real currency.

In other words, the CPC has concluded that Star Stable Entertainment utilizes predatory and unethical business practices that specifically target children. These practices essentially market items, bundles, and virtual currencies to children who may not understand 1) the actual real-world cost of these bundles or 2) spend more than they intend to based on the marketing style, which usually means their parents are spending more.

At the same time, the CPC also provided a set of business guidelines for all companies to follow that ensure their games meet EU consumer protection rules and provide better overall experiences for players. But how this will play out — and what kind of impact it might have on the gaming industry — is still in the air.

What is the CPC asking companies to do?

1. Provide clear and transparent pricing and pre-contractual information
2. Avoid practices hiding the costs of in-game digital content and services, as well as practices forcing the purchase of virtual currency
3. Respect consumer’s right of withdrawal
4. Respect consumer vulnerabilities, in particular when it comes to children

Within these guidelines, the CPC specifically states a handful of action points that should be followed for in-game purchases, regardless of age or any other factor:

• Any in-game virtual or digital purchase for any item, service, or content must clearly display the equivalent in real-world money.
• The cost of any currency bundles must match the price of purchasable in-game content and services.
• The full real-world money cost of any and all virtual currencies involved in the exchange of another virtual currency should be clearly displayed.
  • This means that players must know the paid-in-full real-world money cost without any discounts or promotions applied. In short, no gimmicks should mask the full real-world money price at any point in time before, during, or after a transaction.
• Any digital offers for in-game digital services or content must come with the necessary pre-contractual information.
  • What pre-contractual means is that players must know any and all content included in any purchase, service, or bundle before they buy, no exceptions.

Companies are still allowed to provide in-game digital content but the CPC is essentially saying companies should take a good-faith approach to providing digital content through online stores. These principles are trying to reduce the ways people can be taken advantage of. Informed decision making and consent are the crux of these principles: players should know the real-world money cost for all in-game content and be allowed to make their own decision to spend money from there. Companies must also respect what is called the “right of withdrawal,” or the ability for a consumer to cancel or stop any transaction at any time. Finally, companies must “respect and consider consumer vulnerabilities” which is essentially again asking companies to take a good-faith approach to their consumer base.

Most of the CPC’s principles have self-evident solutions: tell people what something costs at all times and make things as simple and straightforward as possible to understand.

How could these principles affect monetization in games?

It’s hard to say what kind of effect these principles could have on long-term monetization practices in the EU (or in global markets) but one thing is clear: these principles contradict the purpose of microtransactions. At a glance, microtransactions provide players with an unlimited number of digital options for how they want to look and feel in an online world, whether they’re actively providing player power or just cool cosmetics. But the underlying purpose of all microtransactions is to make as much money as possible.

There’s an apparent argument that microtransactions are inherently bad-faith practices and as such, contradict the good faith stance the CPC has asked companies to take in these principles. On a behavioral level, microtransactions take advantage of people more likely to display tendencies associated with addiction and gambling. This is most apparent in the form of loot boxes but is also present with “limited-time” offers and battle pass specific rewards that push players’ fear of missing out (FOMO), where the driving factor is manufactured scarcity and the threat of these items never appearing again. By asking companies to take a good-faith approach that potentially reduces yearly revenue, the CPC has asked companies to take an unrealistic stance.

The real test will be what happens to companies which are found to be in violation. Currently, the CPC has provided Star Sable Online an opportunity to remedy their specific violations and has asked the company to provide a written response in the next month that addresses the issues identified by the CPC Network, including remedies for each. There are a few variables here to consider, specifically how fast these policy changes can go into effect and if they meet the standard outlined in the CPC’s principles. It’s also worth considering what happens if the plan presented doesn’t meet the CPC’s expectations, or more violations happen in the future, and how the CPC will enact any further punitive action.

If the punitive framework relies on fines, companies that are subject to EU law can pay their way out of any real consequences (as long as the profit from microtransactions outweighs the costs of the fines), and may be less inclined to limit potentially predatory practices. Any true punitive action that could implement changes requires a coordinated effort between the different government oversight entities in global markets to adopt a universal standard regarding microtransactions and includes universal enforcement of any companies found in violation, regardless of their geographical market. In short, pushing real change may be more than the CPC can realistically do.

Time will tell if these principles will pave the way for true change in the economic practices of gaming companies that rely on microtransactions, but the hope remains that this is the start of something that will benefit each and every player.