Crunch Time: The Regulation of Social Gaming

In 1968, Stanley Raymond of the British Gaming Board said: “If bingo is to be a social game played between neighbours for modest stakes then we must have rules that ensure that it doesn’t become a source of regret and sorrow and hardship.” More than 40 years later, we are discussing a very different genre of social games but many of the central issues as to social responsibility remain the same.

In April, the Office of Fair Trading (OFT) announced it intends to probe whether children are being pressurised to pay for extra in-game content. For the avoidance of doubt, the OFT have stated that they are not seeking to ban in-game purchases but they will want to ensure that the industry is complying with its consumer protection obligations, particularly in relation to children.

The basis of the investigation is to determine whether the games are misleading, commercially aggressive or otherwise unfair in promoting virtual currency purchases and unlocked functionality. One of the key areas that they will consider is whether the cost is clear when the games are downloaded, possibly leading children or even parents to make decisions that they would not have made if the prices were more transparent from the outset.

Currently, there is no compelling evidence to suggest that social games aggressively target children. For the time being, any such evidence is purely anecdotal and it will be interesting to see how the social gaming industry responds to the OFT’s request for information. It is open to debate as to whether social gaming operators advertise any more aggressively than toy companies or cereal brands but there is a valid concern as to the immediacy with which children can act on their impulses when acquiring additional content on social games.

The OFT’s mission is to make sure that markets work well for consumers but what are the OFT able to do? They have a range of powers. They can impose so-called soft remedies such as requiring the implementation of educational measures and the adoption of codes of conduct.

Equally, they can impose “hard” remedies such as civil or criminal action via the courts. It is worth noting that the OFT does not, in itself, have the power to impose civil or criminal penalties on a business or an industry. These harder remedies are only very rarely used and generally they will look to work with a business or an industry to identify appropriate remedial actions.

The OFT will need to give consideration as to what practical protective measures are already in place and how they might be better implemented. Firstly, most devices allow parents to disable in-app purchases in their settings to prevent any unauthorised purchases.

Secondly, in-game purchases will ask players to enter their relevant store password before authorising the purchase and so it is incumbent on parents to ensure that their children do not know their security details. In theory, these are effective measures but we have seen many examples where either parents are not aware of the disabling setting or their children know their password.

In March, Apple pledged US$100m to compensate parents in the US who are able prove that their children made unauthorised purchase on their iTunes account. This, in itself, is an acknowledgement that there is an issue that needs to be addressed.

It is very easy for people inside the industry to assume that the general public understands the commercial model of freemium games but many out there won’t and that will take time. Educating the general public on these fail-safes will go a long way to improving the credibility of social gaming operators and minimising any media furore.

Over the coming months, the OFT will seek the relevant information and conduct interviews with the industry while also seeking the views of other stakeholders, such as parents. It is anticipated that the report will be published in October.

The debate as to the regulation of social gaming was further intensified at end of May when The Gambling Commission published its technical report on social gambling with the stated intention of initiating debate, setting the scientific research agenda, highlighting potential areas of concern and improving stakeholder understanding.

Some of the key questions ““ amongst many others ““ posed by the report as to the risk implications of social gambling are as follows:

Does the presence of others ““ via the social network element ““ in gambling environments increase the intensity of gambling behaviour?

Do individuals become desensitised to the risks inherent in gambling?

Does the overall experience of social gambling lead players to migrate onto real money gambling based on unrealistic expectations?

Do freemium models increase the risk of loss chasing behaviour in a real-money environment?

Would excessive exposure to social gambling create the “normalisation” of gambling amongst adolescents?

On the positive side, the report considers whether social gambling might act as a valuable educational tool about the potential outcomes of gambling. The report also contemplates the opportunities for social gaming operators to disseminate information to large groups at minimal cost to promote a culture of responsible play.

The three primary conclusions of the report are as follows: firstly, stricter age verification measures could be adopted where children are permitted to engage in gambling-related content, even where real money is not involved, particularly where such mediums are being used to advertise real-money gambling.

Secondly, the impact of some games and certain game features may need closer monitoring and research although the report is non-specific as to what particular features may require closer attention. Finally, the report acknowledges that it is not sufficient to rely on traditional gambling studies when assessing consumer behaviour and that the impact of social gambling should be the subject of further research in its own right.

The report also includes an interesting theoretical analysis of the cultural and jurisdictional contexts that should be considered when assessing the potential impact of social gaming. The report acknowledges that there may be “key differences in the audiences for social gambling games among various jurisdictions”. An obvious example given here is the United States where social gambling currently provides a viable alternative to real money gambling.

Equally, in the UK, social gambling may be played by people for different reasons to the real-money consumer market. In other words, it is too simplistic to apply a one size fits all approach to social gambling and more detailed research is required to understand how and why people engage with these games and what the actual or potential for convergence with real-money gambling is.

By its own admission, the report “lacks a substantive empirical basis” due to the dearth of relevant evidence currently available. It makes clear that the purpose of the report is to “generate debate” and to shape research agendas. The Gambling Commission believes that the report will help distinguish the categories of games that are under consideration, although it now seems clearer than ever that freemium games that do not comprise a gambling theme are not under the microscope.

Social gaming operators will need to respond positively to the OFT’s investigation and they should see it as an opportunity to demonstrate that they are working hard to allay the concerns that have arisen. Similarly, they should take heed of the Commission’s report and further their efforts to co-operate by providing it with the necessary data to carry out the recommended level of research. It is not an issue that is going to go away.