Free to Play: It’s Addictive. Should We Regulate It?

As the Zynga empire has shown, free-to-play online games have become an incredibly lucrative part of the industry. Free-to-play allows anyone to take part without paying a dime, but the games become profitable by inserting advertising and by offering features that will cost you. This could be extra levels, special items, or skipping ahead to later stages. Is calling a game “free" but then later charging fees a deceptive practice? Is it legal, and more fundamentally, is it ethical?

Deceptive trade practices are an important branch of business law. Federal and state law control what qualifies as deceptive practice, and many states have been influenced by the Uniform Deceptive Trade Practices Act. A lot of the doctrines deal with trademark law, a topic we recently covered with respect to Joustin’ Beaver. Pretending that a good is made by a company when it is not is a deceptive practice. So is selling something as new if it is used, disparaging the goods of another by misrepresenting facts, advertising things you do not intend to sell, and so on. Deceptive practices set basic standards of honesty between businesses and consumers. These rules, generally, are at the state law level, and accordingly do vary from state to state. What follows is a general discussion without any particular state’s viewpoint guiding.

Most of those concepts come into play when advertising a product, but there are additional deceptive practices that govern how businesses can behave in their ongoing relationships with customers. This would likely be the area of the law relevant to free-to-play games. It prohibits unfair adhesion contracts, which is when a “take it or leave it" agreement exists between parties with unequal bargaining power. For it to be considered unfair, courts look to whether the terms are outside reasonable expectations, whether the less powerful party would know a term was there, or if the contract is unconscionable or oppressive.

An outgrowth of this concept is the shrink wrap-contract, which directly applies to buyers and sellers of software, like games. The terminology comes from the fact that you cannot see the terms without opening the product. In the case of downloads or websites, web-wrap, click-wrap, and browse-wrap terms only appear when you use the program. There is no nationally controlling decision on the subject. Some major cases like ProCD v. Zeidenberg suggest that these types of contracts are perfectly legal, while others such as Specht v. Netscape found them invalid. Of course, any decision is specific to the facts of the case, so a court would consider an agreement by analyzing it for reasonableness and unconscionability, just like adhesion contracts. Unless a company misled players into believing nothing in the game was ever going to cost money, it seems like free-to-play games with monetized aspects are fine under these principles.

Some countries are extremely concerned about the addictive nature of gaming and have regulated it accordingly. Ars Technica noted that Japan is set to restrict certain practices that prey on compulsive behavior. The new regulations would deal with games that offer random items for a price. Japan’s Consumer Affairs Agency has received complaints after some customers burned through enormous amounts of money while attempting to complete rare sets of digital items. Even though some social gaming companies already voluntarily capped the amount children could spend, authorities have argued the practice violates Japan’s lottery laws.

But as we noted previously, the US is a different story. Japan may be tightening the screws on social games with aspects that resemble gambling, but the Justice Department’s new interpretation of the Wire Act points in the opposite direction. As long as the wager is on the game itself and not some outside activity, the American government seems willing to tolerate it. If a game company does not make promises it cannot keep or step outside of reasonable behavior, they are legally safe building costs into a free-to-play game.

Of course, legal and ethical principles do not always overlap. As free-to-play has boomed, many have wondered whether it is right. When people go overboard and dedicate too much money and time to any game, it makes us uncomfortable. People can become addicted to anything, and games are not an exception. Free-to-play is ripe for criticism because the costs are not immediately apparent.

With other games, the sticker price is immediately obvious. (Some companies have also been criticized by making additional features available only after spending more money, but that is only getting more popular.) With free-to-play, a gamer could end up spending as much or more than they would on your average console title. Some developers are opposed to this because they consider it misleading, while others have it built into their business model. There is no widespread agreement on how to handle this, and gamers will set the industry standard by voting with their wallets.

A challenge with resolving this question is that it raises a larger point about the ethics of sales. Producers of anything from food to video games face a very competitive market. There are a myriad of options and it is a battle to get noticed. One of the most effective ways to court customers and establish an audience is to give them a complimentary taste. That is the logic behind the free samples in the grocery store, or the coupons offering deep discounts for new items. It also underpins the tried and true technique of the game demo that is offered shortly before the full release. You let someone give your product a try, decide if they like it, and hopefully they choose to pay for it.

Free-to-play operates the same way. The developer provides a base version that introduces you to the engine, allows you to have some fun, and then they make their money once you are hooked.  Some believe that because games are ripe for compulsive behavior, they must be regulated. But that is a slippery slope. People can have an unhealthy relationship with food: does that make dropping the price on a new kind of chip unethical? If we started down this road, we might never stop. But it is also possible that the way we perceive games will evolve, and we will shift closer to Japan’s approach. As free-to-play’s market share expands, so does the chance for regulatory scrutiny.

As a gamer, you have influence on how this plays out. If you dislike free-to-play, then do not download the games. Governments might choose to respond, but the market will always be more nimble. As long as free-to-play is a cash cow, it is going nowhere.



Zack Bastian is an official contributor to Law of the Game. A third year student at George Washington University Law, Zack works at the Woodrow Wilson Center's Science and Technology Innovation Program and is a member of the American Intellectual Property Law Association. The opinions expressed in his columns are his own. Reach him at: zack[dawt]bastian[aat]gmail[dawt]com.

GameStop Follow-Up Post

I wanted to post a short follow-up to my GameStop Employee Checkout piece, based on some comments I've received. I did first want to point out that GameStop is evidently reviewing its policies in this regard, so I doubt we've heard the last about this.

First, my suggestion to reprint box art has been brought up a number of times, and I wanted to point out that I expressly said 'with permission.' I can't imagine publishers having issue with the proposed practice, as it would be to sell their products. Additionally, I only mentioned making dummy boxes as one potential solution, albeit one with a high upfront cost to outfit each store with a set of blank boxes and the ongoing cost of reprinting paper inserts as new games are released. Another, possibly more cost effective solution would be to create cardboard cards with the front and back of the box replicated on the cardboard. I have no idea which would cost more, or what other solutions might work, but the point was to suggest a solution by which no new games would need to be opened and gutted or placed outside the safety of the behind the counter locking cabinet.

Second, I can certainly understand why people would be upset to receive an open game, or even be unable to accept one in certain circumstances (i.e. gift giving). However, I still think that if the plastic seal is not a major issue, there is no difference in the game experience between a perfect condition new disk and a perfect condition disk played once by an employee, besides the potential public relations issues. Of course, when I say perfect condition, I mean everything: kept in a smoke free environment, free of dirt, not kept in direct sunlight or damaging temperatures, etc. I believe that's a major factor as to why the GameStop employees I've known are far more likely to check out a used title than a new one.

Finally, for the record, I do shop at GameStop frequently, largely because it's the only retailer where I have been able to consistently pre-order and pick up on release date high demand titles, limited edition titles, obscure titles that don't tend to show up much if at all in big box stores (i.e. new releases by NIS), and new hardware. I haven't personally had any problems with the stores I've frequented over the years, including the GameStop store near my home I currently use. Perhaps this, like other situations, varies a lot based on individual store management, but it's difficult to say.

GameStop's Employee Checkout and Deceptive Trade Practices

Kotaku recently ran a piece noting that the FTC may be interested in the 'employee check out' policy in terms of a deceptive trade practice. The article goes into some detail about the ability of GameStop employees to check out titles from the store on a temporary basis, and in the event these titles are 'new,' then they are brought back in and resold as new. It certainly poses an interesting question: is that a deception to the consumer?

Before talking about substantive law and my take on the issue, I did want to point out one particular clause in the policy, as posted by Kotaku: "If the product is returned in unsellable condition, or if anything is missing from the package, or if the product is not returned, the Associate must purchase the product at the current price less Associate discount." As I have known quite a few GameStop employees over the years, I know that this part of the policy greatly deters the checking out of new games in favor of used ones. After all, even the slightest inclination that a new game isn't 'new' will more than likely force the employee to buy the game, which many of these employees can't afford. A used game has an expected level of wear and tear, so the bar is much lower for the return to store condition.

So, back to the point at hand: is this a deceptive trade practice? There's both a legal and a pragmatic approach to the answer of this question. From a legal standpoint, ignoring any pragmatic analysis, it certainly seems that way from the letter of the law. Certainly, it's something the FTC could investigate, but more practically, it may be a matter for state deceptive trade practices law. In Texas, for example, it is a deceptive trade practice if you are "representing that goods are original or new if they are deteriorated, reconditioned, reclaimed, used, or secondhand."

Of course, the law does not exist in a vacuum, and from a practical standpoint, I'm not sure what GameStop is doing is as nefarious as some people seem to think. The resale of used goods as new rules had a simple policy argument: when they were implemented, practically all goods had a limited useful life, and any use of them would lessen that useful life. If I re-sold a used console, the console's useful life has diminished. If I re-sold a used TV, that TV's life has diminished. That's not exactly the case with a DVD based media. DVDs do in fact deteriorate, but that's something with a clock that begins from production based on normal biodegrading. If a disk has been properly used in a machine and properly handled, has its life been diminished? I haven't seen any data to suggest that it's anything at all, much less anything significant.

Obviously, if the disk, packaging, or other materials are damaged in any way, or if one-time use download codes are used during the check-out, there is no question that reselling that as new would likely be a deceptive act. Of course, the damages would be relatively minute ($5 or so based on the average new release's used price), which could provide difficulty in generating an actual lawsuit over the issue. However, when the disk is cared for and no damage comes to any aspect of the product, has its value actually been reduced? No, and the content of the product is still 100% present. It's a little more nebulous with respect to DS games, as the last of the cartridge systems. I don't know if they have a useful life as determined by play time or not.

From a practical standpoint, I still don't see why GameStop hasn't moved to reproducing cover art with publisher permission and just re-using empty cases so that no titles have to be opened. Granted, that would basically limit employee check out to used titles, but I'm not sure that's a huge loss to the average employee as many new releases are in short enough supply to prevent check out by the policy as reported by Kotaku anyway. It will certainly be interesting to see if the FTC takes any action on this matter, but from a pragmatic standpoint, I'm not sure they will based on the facts.

[EDIT: I've posted some follow-up commentary here.]