(MEDIA) Upcoming changes to the games industry landscape will heighten regulatory complexity

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Upcoming changes to the games industry landscape will heighten regulatory complexity

Video games and the platforms distributing them are becoming increasingly regulated. While some of this regulation is game specific, much comes from wider EU and other "digital regulation" aimed at media and tech companies that catches publishers and others. The benefits include creative (and cost effective) solutions to production problems faced by the industry
The current regulatory regime will present challenges for smaller companies that do not have the in-house teams nor the budget to ensure compliance with the law
With increased regulation comes increased risk, so finding the right solution to maintain compliance is key. In creative industries, competing interests for rightsholders, producers and talent quickly create a web of complexity

The games industry is becoming increasingly regulated and 2024 will bring yet more obligations into force. While the legislation does not concern games specifically, much of it pertains to all things "digital" and should be on the games industry's radar. The new regulations also originate from multiple jurisdictions, which presents a further challenge for games companies: working out how to balance competing regulatory obligations with each other and implementing them within a multinational corporation. The industry is having to navigate a range of new developments internationally to establish a risk-acceptable path to video games compliance.

The UK: regulatory change

The Digital Markets Competition and Consumer Bill is set to bring significant regulatory implications, including the introduction of a unique UK subscription contract regime, an updated unfair commercial-practices regime, and fines for consumer law breaches of up to 10% of a company's global annual turnover.

These changes represent multiple challenges, which include the need to evaluate legal compliance of existing platforms and practices. "Dark patterns" will remain a key regulatory focus. The Competition and Markets Authority (CMA) brought several cases in the retail sector in 2023, with enforcement action in relation to dark patterns expected more widely.

Germany: protection of minors

The German federal states are working on a project to enhance the protection of minors in the context of online media. The proposal places obligations on providers of operating systems to implement parental control systems and requires companies to block access to apps or services that do not have a rating for the appropriate age range by default.

While individual content providers do not have to comply directly with these requirements – should they become law – game publishers may have to consider how they might go about obtaining ratings for their apps and content, so as to give parents effective tools and choices while avoiding over blocking access. This may include obtaining youth protection law certifications for in-house trust and safety teams or leveraging technical tools such as the International Age Rating Coalition content rating system, which is recognised by German authorities.

India: tax and data

Two significant themes stand out in the Indian market: tax and data. In the tax sphere, the Indian games industry, following its meteoric rise on the back of the Covid-19 pandemic, has hit a number of regulatory roadblocks in the past year. The imposition of a new 28% goods and service tax on "real money" games sent the industry into a state of flux and the focus of in-house teams has shifted to dealing with related tax evasion investigations.

For data, the recent enactment of the Digital Personal Data Protection Act 2023 is set to place greater regulatory and compliance burdens on online gaming platforms. Companies will need to reassess and redesign mechanisms used for obtaining verifiable consent from underage gamers, as well as complying with access, deletion and nomination requests of the personal data of gamers and re-evaluating the use of metadata for marketing and monetisation purposes.

The online gaming sector in India will be required to move quickly to operate in this new regulatory reality in 2024 and come up with effective strategies to retain players and attract investment in the wake of the new tax.

Italy: dark patterns and transparency

In Italy, the focus of the regulatory authority will be on uses of dark patterns and the transparency of the practices relating to micro-transactions, subscriptions and monetisation within the online gaming environment. Increased regulatory scrutiny is expected on the processing of personal data relating to minors, with enforcement action recently taken against online service providers.

The Netherlands: 'loot boxes'

The main focus of gaming companies in the Netherlands is on blockchain games and financial regulation of "loot boxes". Gaming companies are becoming increasingly reliant on blockchain, which may fall under Dutch financial regulatory law depending on the type of activity involved. Blockchain-based products and services come in many forms, such as accepting cryptocurrency as a payment, implementing crypto-based loyalty programs and the tokenisation of in-game assets.

Currently, Dutch financial regulatory law does not specifically address blockchain-related services. However, from mid-2024, the EU Markets in Crypto-Assets Regulation (MiCAR) will gradually come into effect. It has a wider range than the current registration system. Among other things, MiCAR will introduce a licence requirement for 10 crypto-asset service and requirements for crypto-asset issuance, which will come into force on 30 June 2024.

Loot boxes have always been subject to heavy scrutiny in the Netherlands – the Dutch Betting and Gambling Act forbids the use of loot boxes without a gambling licence if the loot box can be considered gambling. The Netherlands Gambling Authority (Nederlandse Kansspelautoriteit) considers the purchase of loot boxes to be gambling when the rewards have an economic value and the reward depends on luck rather than skill.

The Dutch House of Representatives called for a ban on loot boxes in 2022, in response to a Dutch Council of State ruling on the loot box mechanism, which was supported by a majority of the house. However, following a delay on the motion at the end of 2023, it is currently unclear whether the house and government will proceed with the ban in the 2024 session.

France: age of majority

For online gaming platforms that involve the provision of social networking services as defined in the Digital Market Act, French law that was introduced in July 2023 created a special age of majority for the "digital space" that imposes obligations on companies, including to refuse the registration on their services of minors under the age of 15 unless express authorisation is given by one of the persons with parental authority over the minor.

Furthermore, the bill "to secure and regulate digital space", or SREN, introduces specific obligations on online service providers to combat types of illegal content online, such as pornographic content or images of child sexual abuse, by imposing a steep fine for companies that fail to remove content within 24 hours.

The road ahead

The regulatory landscape that gaming companies will need to navigate looks challenging for 2024. Increased regulation will bite across a range of areas and markets, with which the games industry will need to ensure continued compliance.

Further Osborne Clarke Insights

Age assurance focus European regulatory action online protection minors

Significant changes to UK competition and consumer law proposed in Digital Markets, Competition and Consumers Bill

EU's Markets in Crypto-Assets Regulation establishing regulatory framework is approved

European regulators set to clamp down on 'dark patterns'

Authors

Tom Harding Partner, UK tom.harding @osborneclarke.com

Julia Darcel Counsel, France julia.darcel @osborneclarke.com

Dewi Harkink Senior Associate, The Netherlands dewi.harkink@osborneclarke.com

Felix Hilgert Partner, US felix.hilgert@osborneclarke.com

Gianluigi Marino Partner, Italy gianluigi.marino@osborneclarke.com

Ayan Sharma Senior Associate, India ayan.sharma@btgadvaya.com