In a bid to induce gamers to purchase games or in-game treasures, video game developers have historically employed the language of “a high likelihood of winning” to reel in gamers. Yet this has led to consumer disputes. For example, a famous Taiwanese live streamer, DinTer, recently accused Gamania Digital Entertainment Co., Ltd. (“Gamania”) of making the Purple Cloth treasure in its game, Lineage M, harder to attain than was promoted. Ultimately, Gamania was fined NTD 2,000,000 by the Fair Trade Commission (the “FTC”) for false advertising. At once, consumer disputes of this sort have moved to the forefront, and the litigation in this case has captured the public’s attention.
In light of an increasing number of consumer disputes, the Ministry of Economic Affairs (the “MOEA”) and the FTC have both amended the laws to clearly mandate that developers disclose the percentage odds of winning prizes in their games, and that they advertise these odds truthfully. The relevant provisions are set out in the Directions Governing Required and Prohibited Stipulations in Standard Form Contracts for Online Gaming Services and the Fair Trade Commission Principles for Handling Cases Involving Article 21 of the Fair Trade Act, respectively. The MOEA’s Directions will take effect on 1 January 2023, while the FTC’s Disposal Principles were already promulgated on 17 August 2022.
1. Directions Governing Required and Prohibited Stipulations in Standard Form Contracts for Online Gaming Services
The Directions Governing Required and Prohibited Stipulations in Standard Form Contracts for Online Gaming Services (the “Required and Prohibited Stipulations”) set out certain requirements. It required that developers indicate—on its official website, the login page of its game, or the purchase page and game packaging—the content, prizes, and other information of paid in-game items or events that depend on chance. But the amended Required and Prohibited Stipulations (published on 10 August 2022) further required, in no uncertain terms, that developers disclose the likelihood of winning chance items or events in game. Moreover, the likelihood must be presented in percentage terms instead of in vague terms like “very high” or “very low.”
In addition, this amendment clearly requires that the likelihood of winning be presented in percentage terms whether payment for those items was made directly, indirectly, partially, or in full.
As long as payment is made for a purchase, developers should disclose the percentage odds of winning regardless of whether the item purchased is used directly to participate in a draw. In other words, this disclosure requirement is not limited to instances where the consumer “directly” makes payment to participate in a draw. Even if, after purchasing an item, the consumer uses that item to participate in a further draw to obtain another item, the developer faces the same disclosure obligation. For example, many games contain virtual currency like virtual diamonds, gold, coins, and so on. The consumer can use real money to purchase diamonds in a game and then use those diamonds to purchase various game equipment, or as chips with which to participate in prize draws. The consumer makes payment via an “indirect” method when he or she uses the virtual diamonds purchased to join a prize draw. According to the rules in this amendment, the developer is obligated to disclose the odds of winning each item. Even if the diamonds the consumer purchased, in our example, were used to purchase another item with which the consumer can participate in a prize draw, the disclosure obligation still applies. There is no limit on the number of further transactions for which the developer has this disclosure obligation.
On the other hand, as long as the consumer makes payment to participate in a prize draw, the developer should also reveal the percentage odds of winning. This is true whether payment is made partially or in full. For example, consider a prize event that involves obtaining a key to open a treasure chest to capture the prize item in the chest. The consumer makes “partial” payment because he or she has only had to pay for the key and has obtained the chest for free by completing an in-game task. In this case, the developer must still disclose the odds of winning in percentage form.[1]
From this we can see that the MOEA’s purpose in amending the Required and Prohibited Stipulations is to compel video game developers disclose the odds, in percentage form, of winning in-game items during various events. This allows the consumer to gain a sufficient understanding of the event and the odds of winning the prize items before making a purchase. On the basis of this understanding, the consumer can evaluate whether to spend his or her money on an online game, among other expenditures. As a result, the consumer’s rights and interests are better protected.
2. Fair Trade Commission Principles for Handling Cases Involving Article 21 of the Fair Trade Act
According to Article 21 of the Fair Trade Act, a business entity may not make or use any false or misleading presentation or symbol when using “factors sufficient to affect a trade decision” in advertising. And the so-called “factors sufficient to affect a trade decision” refer to any “matter possessing a touting effect.” On this point, the Fair Trade Commission Principles for Handling Cases Involving Article 21 of the Fair Trade Act (“the FTC Principles”) further define and clarify what is meant by a “matter possessing a touting effect.”
Many recent consumer disputes in the gaming industry relate to the odds of winning prizes in games. To prompt video game developers to truthfully advertise the odds of winning prizes in their games, the FTC named the “probability or actual item of chance prize goods (services)” as a “matter possessing a touting effect” in its amendment of the FTC Principles on 10 August 2022. In addition, the FTC listed “the odds of winning or the actual prizes of paid chance items (services) being inconsistent with reality, and this inconsistency being greater than that which is acceptable to the normal or relevant consumer” as a common type of false advertising. In doing so, it is reminding developers that any false or misleading language may constitute a violation of Article 21 of the Fair Trade Act.
Thus, we can see that the purpose of amending the FTC Principles is primarily to include the marketing and promotion of “the odds of winning or prize items of prize goods (services)” as a type of false advertising under Article 21 of the Fair Trade Act. This will lead developers to understand that they are obligated to make a “good faith disclosure” of the odds of winning in-game prize items under the Fair Trade Act.
3. A Final Word
From the aforementioned amendments to the Required and Prohibited Stipulations, it is clear that, from 1 January 2023 onward, any developer whose online game contains paid prize draws should accurately disclose the content of the prize item (or service) and the odds of winning it. If the disclosed information is inaccurate, the developer has likely violated the Fair Trade Act.
But the scope of the amendments to the Required and Prohibited Stipulations and the FTC Principles is limited to the realm of legal regulations. Whether the disclosed likelihood of winning is consistent with reality and how this likelihood should be determined are questions in need of verification by a third-party institution. Recently, the Executive Yuan’s Administration for Digital Industries, Ministry of Digital Affairs encouraged the Digital Industry Promotion Self-Regulated Committee, Taipei Computer Trade Association, and other relevant organizations to discuss the strengthening of verification mechanisms. The Administration, together with the ROC Consumers’ Foundation and the Entertainment Technology Center at the National Taiwan University of Science and Technology, launched a Third-Party Probability Verification Site[2]. This site solicits big data from gamers to verify the odds of winning prizes in games. The weight to be given to the verification results, from a legal standpoint, remains to be seen.
For more information on gaming and advertising compliance matters in Taiwan, please contact Ling-ying Hsu at lhsu@winklerpartners.com.
This is a translation of the original article in Chinese, which can be found here. Translation by Yoann Huang.
[1] See press release from the Executive Yuan’s Consumer Protection Committee (https://cpc.ey.gov.tw/Page/6C059838CA9744A8/adc0330c-bd72-416b-9ecf-08e6a9d339ec).
[2] See http://gacha.gamelab.com.tw/ for the Third-Party Probability Verification Site.
Written October 7, 2020 By Ling-ying Hsu and Helen Chen
Translated on December 13, 2022 By Yoann Huang