Online Gaming (Consumer Protection)

Owen Thompson Excerpts

Tuesday 13th September 2016 Westminster Hall

[Owen Thompson (Midlothian) (SNP)]

I beg to move,

That this House has considered consumer protection for online gaming.

First, I probably should declare an interest as an avid gamer myself, which is largely how a number of the topics I will speak about came to my attention, initially at least. I particularly want to draw attention to the protections for children and the UK and international regulatory frameworks, and to consider whether the ever-changing industry is regulated appropriately now and whether provisions have been made to ensure that the legislation can adapt to future developments and challenges.

Gaming has changed a lot since my childhood, when I played on my Super Nintendo and Amiga 1200 and my friends’ Mega Drives. Now there is no longer a need for the consoles or games, or even the reams of wire that often came out of the back of the television. Instead, today’s gamers often find that purchasing the latest game leads to a further purchase. For example, with “Star Wars Battlefront”, gamers buy a season pass if they want to access the full content of the game and they need to spend game currency, which is often bought with real money, to ensure that their character has the best weapons, equipment and experience.

In the 2016 GameTrack survey, only 24% of respondents reported that they gamed on consoles, with 24% playing on computers, 21% on smart phones, 16% on tablets and 11% on handheld devices. The new digital age has revolutionised how we access digital content and how and where we as consumers spend. A staggering 45% of households own either an Android phone or an iPhone and the UK app market is now worth £500 million, with half of that spent on games. UK consumer spending on video games in total is increasing.

According to figures from the Entertainment Retailers Association—the ERA—the total value of consumer sales was about £2.8 million in 2015, up 10% on the year before. Critically, the ERA also found that UK consumers spent £1,899,000—67% of the total—on digital video game media, compared with just £928,000, only 33%, on physical copies of the games. That trend is not confined to the type of content purchased; it is also seen in where customers buy their video games. Only 22% of purchases last year were made in a traditional bricks-and-mortar retailer, which means that the traditional consumer protections that go with owning products purchased by way of a transaction with a retailer do not exist. Instead, we have become consumer slaves to terms and conditions.

As an ever-larger proportion of the games industry moves towards right to access content, in-app purchases and other digital content, it is vital that the law properly protects UK consumers. The change in the industry, particularly in gaming, has been happening for some time. From a few key players in the 1990s, there has been a swing towards small and micro-sized businesses, which now account for 95% of the UK games industry. The change in consumer demand has allowed budding and talented digital entrepreneurs to adapt quickly, and the in-app purchase model now represents 76% of the revenue share of UK apps. Although it is right that we should support the growth of the business, it is also vital to support sensible measures to protect our consumers.

On the economy, 21,000 jobs are supported by the industry across the EU, with the UK taking the largest share, at 5,000. Additionally, the core UK video games sector—that is, video games supported wholly or partially in the UK—supports 12,100 full-time equivalent posts of employment, with the UK also enjoying a raft of successes in the industry. In-app development in the UK is performing well internationally, a key example being “Monument Valley” by ustwo studio. Also, “The Room 2”, produced by Fireproof Studios, was awarded the App Store iPad game of the year in Apple’s best of 2012 line-up, and “Candy Crush Sage” by King had reached 500 million installations by November 2013. When considering the performance of the UK, it is interesting to note that on revenue per download figures the UK is the best positioned country in western Europe, with a potential of $0.47 per download, making the UK more profitable than Germany, the United States and China.

The international markets are crucial to the industry, with 95% of UK games businesses exporting at least some of their products or services to overseas markets. On average, 45% of a UK games company’s turnover is generated from international sales. That becomes crucial in consumer protection, as exporters and importers become the customers, as customers agree to terms they might not expect—or indeed read—and as protections that are in place when someone walks into their local games store and makes a purchase no longer exist.

It took until 2015 to set out in legislation consumer rights regarding digital content. Although I am grateful for the progress that has been made and for the foresight with which the legislation was drafted to accommodate further developments, I fear there are already inconsistencies between the good intentions of the legislation and the markets in which consumers buy, and businesses sell, content. In some instances, transactions take place outside of any monetary transactions, but the consumer could pay dearly. With the recently launched “Pokémon GO”—a popular game that I cannot deny has sometimes seen me battling in the gyms and throwing Poké Balls around—there are some interesting terms and conditions. The data protection clause, for example, states that Niantic restricts users from bringing forward any legal action, should data holders wish to do so.

As for the legislative framework, the main legislation that directly regulates online gaming purchases is the Consumer Rights Act 2015. The Act sets out the basic rules governing how consumers buy, and businesses sell, digital content, including online gaming apps, in the UK. However, it works in terms of international agreements. For example, if an online game is purchased from outside the UK, whether UK consumer protection law or the law of the host country applies depends on the exact terms of the contract entered into by the two parties and also on the buyer’s own terms and conditions, which should stipulate which jurisdiction applies. Although such information must be given to the consumer before the contract is entered into, it is far removed from the easier days of buying a disk or a cartridge for my old Super Nintendo.

The 2015 Act came into force on 1 October 2015. Part 1 changes consumer rules on what to do if goods, services or digital content are faulty. For the first time, consumers’ statutory rights regarding digital content were set out in legislation, following calls by consumers, watchdogs and the gaming industry for such clarity over many years. For the purposes of the 2015 Act, digital content was described as

“data which are produced and supplied in digital form”,

which would include downloadable apps, computer games, films, e-books and computer software. However, there is another side to the consumer contract. At times we give data back and, with widely used apps such as Pokémon, loss of those data can be of little consequence to the data holder, but of huge consequence to the consumer.

Recently, WhatsApp, an app that allows people to have conversations, was at the centre of a data opt-out controversy, whereby unless consumers read a long list of technical terms and conditions, they would automatically be allowing the transfer of some data to Google. Although I and the Scottish National party support fair regulations, I find the mass collection of behavioural data unnerving at the very least.

When such data are collected from unknowing or unwitting consumers, who do not have the inclination or understanding—or, to be honest, the time—to read through long-winded terms and conditions in an agreement about the legality of court arbitration, we must look again at the legislative framework and its ability to adapt. With more and more app providers looking for access to content, and for that to be currency-as-such in a consumer contract, that should also be an essential component of legislation that seeks to protect consumers in that market.

I welcome the attempts of the Consumer Rights Act to rightly define when the legislation can and should be used. I welcome the fact that it clearly sets out that digital content will be regulated when it is

“supplied for a price…supplied free with goods or services or other digital content”,

or is

“not generally available to consumers unless they have paid a price for it”.

To pose a question that will perhaps widen the debate further, what are we using for currency with free apps? We allow those apps to use our photos, favourite places, restaurants, credit cards and where we go and how we go about our lives—our most personal moments and sometimes our most precious. At what point do we draw a line? At what point do we consider that as being the currency for digital content?

The legislation does not yet appear to be working, even in straightforward terms. Even since the 2015 Act came into force as the flagship legislation, consumers have had issues with the most straightforward elements. For example, the games “Dead Rising 2” and “Dead Rising 2: Off the Record” caused quite a fuss among the gaming community. Users have claimed that PlayStation UK will not refund customers who believe the product to be faulty. In the run-up to today’s debate, I was contacted by a number of people who have had similar issues with the recently launched “No Man’s Sky”.

On further research, it seems that the companies’ interpretation of the Consumer Rights Act 2015 varies. A number of individuals purchased the game through Sony PlayStation’s online platform. The game proved to be faulty, and the individuals are now trying to receive redress and money back, but Sony says that it will not do that, because under the terms and conditions the money-back option is available only if they have not yet downloaded the content. If people are purchasing content online and the only way to access it is to download it, it seems to go against the ambitions of the 2015 Act somewhat if a company’s terms and conditions immediately count that as beyond terms. That is a particular challenge when accessing a game online: to own it, people need to download it, and to download it, they need to buy it first.

Frustrated users have taken to Twitter to complain that the game crashes repeatedly and that promised features never materialised. Others claim that to request a refund, consumers are required to run through a list of troubleshooting options with a customer services representative before the case is passed over to the PlayStation investigation team, who then decide whether the case justifies a refund. That is an especially important aspect when we consider that some young children can access digital content and at times enter into binding consumer agreements that can have financial consequences for bill payers. That brings into question the ability of the current legislation to impact on that. We have several types of overlapping legislation, with different regulators. Perhaps now is the time to pool the legislation together.

[Mr Gregory Campbell (East Londonderry) (DUP)]

I congratulate the hon. Gentleman on securing the debate. On the issue of children, does he agree that we need to ensure constant vigilance, particularly when companies package games in ways that are exceptionally attractive to children, who try to pressure their adults into buying added-on features as a result of the initial product they purchased?

[Owen Thompson]

I absolutely agree. That is one of the critical aspects. I accept that steps have been taken to ensure that free apps are not necessarily advertised as free apps if there are in-game purchases, but that will not satisfy a relatively young child who simply wants to play the full content of the game they have downloaded or bought. If that requires a season pass or the purchase of additional content, it could become difficult to manage that child’s demands and expectations and to explain the terms and conditions and why they cannot have that additional content. We need to be particularly vigilant in that area.

[Patrick Grady (Glasgow North) (SNP)]

I, too, congratulate my hon. Friend on securing this important debate. On the subject of children, is it not the case that young children, in particular very young children, will often not even realise what they are doing if they are playing a game and sign up for an in-app purchase or some kind of enhancement? I met recently with StepChange Debt Charity in Glasgow, and it had numerous stories of parents faced with outrageous bills that they had no chance of ever affording. Their children were buying enhancements to the games without realising. Does my hon. Friend agree that as well as regulation, developers have to take some responsibility?

[Owen Thompson]

I entirely agree with my hon. Friend. The situation he describes is familiar to me. I am aware of a number of cases where that has happened. I accept that steps have been taken and there have been improvements, but it is still possible for young children, because they are playing these games online, to rack up large bills perhaps without realising what they are doing.

To illustrate the situation further, it is worth noting that the Advertising Standards Authority, which is the UK’s independent regulator of advertising across all media, applies the advertising codes, which are written by the Committees of Advertising Practice, and those codes include acting on complaints and proactively checking media to take action against misleading, harmful or offensive advertisements, including media used to encourage children to purchase and/or downloads apps. Specifically with children in mind, the rules contained in the codes are designed to ensure that adverts addressed to, targeted directly at or featuring children do not contain anything likely to result in their physical, mental or moral harm.

The ASA states that the way in which children perceive and react to ads is influenced by their age, experience and the context in which the message is delivered. It is therefore crucial that the adverts that children see, hear and interact with do not confuse, mislead or directly exhort them to make purchases. That said, with the best will in the world, if a young person is playing a game, they want to be able to access the content. If their friends are advancing faster than they are, it is likely that, regardless of any adverts, they will want to purchase further enhancements so that they can catch up.

This issue is not a new concern. In April 2013, the Office of Fair Trading launched an investigation into the ways in which online and app-based games encourage children to make purchases. It investigated whether there was general market compliance with consumer protection law and explored whether online and app-based games included commercial practices that might be considered misleading, aggressive or otherwise unfair under the legislation. As part of that, the OFT published several publications and sent out a stark warning that the online games industry must improve in this specific area.

In January 2015, “The OFT’s Principles for online and app-based games” clarified the OFT’s view of the online and app-based games industry’s obligations under consumer protection law. The principles focus on how games are advertised to children and state that consumers should be told up front about the costs associated with a game, in-game advertising and any important information, such as whether their personal data are being shared with other parties for marketing purposes. The principles also make it clear that in-game payments are not authorised and should not be taken unless the payment account holder, such as a parent, has given his or her express informed consent. Failure to comply with the principles could risk enforcement action. In the press release that accompanied the publication of its principles, the OFT spoke of its aim to raise standards globally. It said:

“Many games are produced abroad and the OFT has been leading the global debate on these issues. By working closely with international partners, the OFT has ensured that the principles are consistent with the laws of most key jurisdictions to help to raise standards globally.”

The OFT also published guidance for parents to help to ensure that children are not pressured into making in-game purchases and to reduce the risk of their making unauthorised payments.

Specifically, the OFT advice suggests that parents take various actions, including restricting payments, playing the game themselves, and being aware of automatic updates that may change either the game content or the associated terms and conditions. That is clearly sensible and good advice. I would certainly recommend that advice to any parent or gamer, although it is clear that it is not always practical in today’s modern world, where recording an appointment or making a call requires an app.

In terms of progress, it is encouraging that the Competition and Markets Authority, which has taken over the functions of the Competition Commission and certain consumer functions of the OFT, has an overarching responsibility for monitoring the gaming app sector to assess its compliance with consumer protection law. The CMA has affirmed the OFT’s principles for online and app-based games guidance. However, it is important to note that the original text was retained unamended and so does not reflect or take account of developments in case law, legislation or practice since its original publication. That is a missed opportunity.

In June 2015, the CMA concluded its work monitoring the children’s online and app-based games market and referred three online games to the Advertising Standards Authority for investigation on the basis that they may have breached the UK non-broadcast advertising code, by directly encouraging children to buy or ask their parents to buy extra game features. On 26 August 2015, the ASA ruled that both the “Moshi Monsters” and “Bin Weevils” games had breached the advertising code by putting pressure on children to buy a membership subscription and stated that the adverts in each of those games must not appear again in their current form. The third game was referred to the equivalent Spanish advertising self-regulation organisation.

On 4 June 2015, the CMA also published a short guide providing advice to parents and carers about the games, again prompting parents to assess purchases. It also released further information about progress overall. It stated that it had worked closely with the European Commission, the International Consumer Protection and Enforcement Network and national consumer protection authorities around the world and that, as a result, Google and Apple had made changes, in particular to strengthen payment authorisation settings and to ask games makers to stop describing games as free when they contain in-app purchases. Those changes are designed to prevent parents from being landed with unexpected bills from in-app purchases made by their children. The CMA at that point was encouraged by

“positive changes in business practices since we started looking at this sector”,

but was

“concerned that some games may directly encourage children to buy extra features during the game.”

Therefore, to present the Consumer Rights Act 2015 as legislation that can guide and help consumers and protect children and businesses may at this point be a little ambitious at best.

In noting that last point about the CMA’s work, it cannot go without saying that we should value the work of our European partners. My colleagues and I in the Scottish National party are very concerned about the effect of being taken out of the European Union, not only on our collaboration on issues such as consumer protection, but on the value of our world-leading video games industry. Gaming is one of Scotland’s many success stories, from creating the globally renowned “Grand Theft Auto” series to a whole host of other massive successes. There is a huge talent pool available that could see significant impacts as a result of the decision to leave the European Union. Scotland is internationally recognised for innovative game development and for its groundbreaking university courses. Clive Gillman, director of creative industries at Creative Scotland, recently said:

“Scotland’s games are played by millions all over the world—there is no doubt that Scotland has played a hugely significant role in establishing this industry as one of the leading forms of entertainment globally.”

Looking further into the future, we must address concerns and uncertainties about the status of European-based funding. Horizon 2020 is the European Commission’s largest primary funding programme for research and innovation, with a budget of €79 billion. It allocates funding through two-year work programmes administered by the Commission, and includes calls for tenders for interactive entertainment projects such as games. Creative Europe, administered by the European Commission, has a budget of €1.46 billion, of which €3.4 million has been set aside for the development of new video games with high circulation potential. In 2015, the UK was the largest beneficiary of that fund. I would welcome any clarity the Minister could provide on the likelihood of such funding for the games industry continuing in the post-Brexit environment. Concerns have also been raised about the validity of international licences and our ability to affect and be compatible with EU consumer law.

The last point I want to touch on is an incredibly important one. In an industry driven by talent, led by talent and entrepreneurs, we want to encourage a market supported by Government that is fair for both consumers and businesses. Right now, that is being put at huge risk, particularly in Scotland, by restrictive UK immigration laws and, crucially, the status of the post-study work visa. It is simply economic vandalism that the ability to travel, work and study across the EU is now at risk following Brexit, and it is a further lack of judgment by the Home Secretary to refuse Scotland an opportunity to take part in the trial of a new post-study work visa scheme. That is an appalling missed opportunity.

I look forward to the Minister’s response. This is a topic on which we could expand at endless length and I very much hope that progress can be made to recognise the ever-moving feast that we see within the games industry. With that, I simply say: game over.

--- Later in debate ---

[Owen Thompson]

I will be relatively brief. I thank hon. Members for their contributions this afternoon. This is a very important issue. It is critical that we keep on top of what is an ever-moving feast and adapt to the changes as they come, including those that, as the Minister said, we may not even be able to predict yet.

I am encouraged by the Government’s response, which demonstrates that there is no complacency. I welcome that, and I think all hon. Members will be reassured by the steps that have been taken to continue monitoring and look forward. Since I became an MP, I have not been able to game quite as much as I might like to, or as much as I was used to, but if the Minister keeps at it, he might capture a Pikachu one of these days and become a Pokémon master.

Question put and agreed to.

Resolved,

That this House has considered consumer protection for online gaming.