Friday, May 4, 2007

Virtual Goods and Consumer Protection

In Response to:
Uk gov't urged to act on 'virtual goods':
Anti-fraud laws should apply to Second Life

I have dealt with a wide variety of consumer protection issues in my career, primarily ones dealing with franchising. Consumer protection, in general, is a double edged sword: on the one hand, naive consumers should be protected from frauds; on the other, government regulations do not always work as planned and always inevitably lag behind real world progress. With the evolution rate involved with online commodities and virtual goods, the gap between the world the regulations are designed for and the present reality will always be vast. I, however, will grant that some sort of consumer protection needs to exist. I would propose, rather than allowing government regulators to handle the situation, the creation of a multi-national regulatory body to handle issues in virtual goods. The body would basically parallel a licensing board (much like doctors and lawyers deal with) that can adapt its rules at a much faster pace to conform to the reality of the business, but at the same time have the ability to censure members.

The first step would be the creation of the body with some recognition by governments. The only real restriction that the governments need to authorize is that in order to be a virtual commodity supplier and/or broker, you must be licensed by the board. This would mean that games that wish to have real world currency transactions, such as Second Life, must be registered. Additionally, if someone wanted to act as an independent virtual goods broker (a profession which will undoubtedly appear in the not too distant future), they must be registered as well. The exact details of license requirements would have to be detailed by the board. More than likely, games without real-world transactions (i.e. Word of Warcraft) would be exempt from registration and licensing.

Ultimately, then, the board has the responsibility to field complaints issued about their members. Upon review, the board would be free to fine members or suspend licenses, just like bar associations and medical boards. Assuming the policing is adequate, the consumer protection desired would exist without bogging the entire system down in government action. Moreover, the board would be able to address new technological issues as they emerge, whereas a government would be horribly behind and lack the experts to completely understand the problem (not to mention the partisan political element and typical inter-nation bickering).

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