European consumer body challenges in-game premium currencies

The question

When does the use of in-app and in-game premium currencies pose consumer regulatory issues? Does this consumer complaint herald a tightening by the EU on revenue streams for game and app developers and platforms?

The key takeaway

A complaint by European Consumer Organisation (BEUC) on in-app and in-game currencies has underlined the need for games and app developers and platforms to consider how they use and interact with consumers on in-game and in-app transactions, especially where they involve premium currencies or consumers under the age of 18. The focus of the complaint is around transparency to consumers in the video game and platform sectors.

The background

The European Commission (EC) is conducting a ‘Digital Fairness Fitness Check’ of EU consumer protection legislation including the Unfair Commercial Practices Directive (UCPD), the Consumer Rights Directive (CRD) and the Unfair Contract Terms Directive (UCTD).

The BEUC (full name the Bureau Europeen des Unions de Consommateurs) has responded to the EC’s call for evidence with a complaint regarding business practices around in-app and in-game sales involving premium currencies (ie in-game currencies that can be purchased with ‘real-world money’ eg pounds sterling), particularly in relation to sales to children.

In-game purchases are a now well-known revenue stream to game developers and platforms. Consumers can use real-world money to buy items or advantages within a game, or to buy premium currencies which can then be used to make in-game purchases. Examples of premium currencies include Robux (from Roblox), V-bucks (from Fortnite), and MineCoins (from Minecraft), which currencies can be bought using real currency or earned via playing the game. The BEUC notes that in-game purchases are now a major revenue stream, generating more than $15 billion in 2020, and that in-app and social media spending is also growing.

The BEUC contends that the existing legislation requires app and game developers to be transparent about in-app and in-game purchases, but that they are failing to meet their obligations, particularly where the transaction involves premium currencies. The BEUC calls for further policy, regulation and enforcement of in-app and in-game transactions involving premium currencies in the video game and platform sectors.

The development

The BEUC has made a number of recommendations as to how the EC could better regulate these premium currencies, which include:

1. Banning the use of in-app and in-game premium currencies entirely (or, at a minimum, for consumers under 18) and mandating purchases to be denominated in real-world currency.
2. Strengthening the transparency requirements in the Consumer Rights Directive and the Unfair Commercial Practices Directive in relation to in-app and in-game purchases involving premium currencies, eg by requiring the real money price next to the virtual currency ‘price’.
3. Imposing stricter requirements around (i) activation of in-app payment mechanisms (to require consumers to activate these mechanisms before they can make purchases); and (ii) payment authorisation, to prevent unwanted purchases.
4. Amending or clarifying consumer legislation to ensure that consumers’ rights in respect of digital monetary transactions extend to in-app and in-game purchases, and to transactions involving premium currencies. For example, the BEUC suggests that currently consumers generally:
   
   

   – license the right to play games and therefore do not own the in-game and in-app premium currencies obtained in the game

   – are not entitled to rights of withdrawal as they would be with other digital monetary transactions

   – are not entitled to exchange premium currencies back into national currencies.
   
   

5. Allowing consumers to choose the amount of premium currency they wish to buy without being forced to choose from bundles created by the developer.
6. Enforcing regulatory requirements against game and app developers as a priority, including conducting sweeps to identify widespread or recurrent unfair practices in relation to premium currencies.

Why is this important?

The bans proposed by the BEUC – either the general ban or the prohibition for under-18s – would require a drastic revamp of a crucial revenue stream for game and app developers and platforms. In particular, it would affect developers whose monetisation strategy depends on the one-way conversion of real-world currency into their premium currency.

The BEUC’s other recommendations, if adopted by the EC, could also significantly impact developers’ monetisation and consumer engagement models, and have further implications for the design and delivery of apps and games and transactions within them. For example, the BEUC’s suggestion that all games with in-game purchases can only be installed once a password has been inputted would likely impact all storefronts or channels through which games can be purchased in Europe.

More generally, the BEUC’s complaint suggests there is significant consumer dissatisfaction around the use of premium currencies, including around the lack of transparency of the real-world value of the premium currency. Given the values of in-game and in-app transactions, game and app developers can expect to be the target of class actions which seek to give consumers greater visibility and control over their spend within a game or app.

Any practical tips?

Although the EC is yet to complete its Digital Fairness Fitness Check, we expect scrutiny of in-app monetisation models and use of premium currencies will increase, particularly where there is a risk of sales to under-18s. It would be prudent for game and app developers and platforms to start considering how the BEUC’s recommendations would impact their businesses, including:

• to what extent does the monetisation and consumer engagement model depend on the use of in-app or in-game purchases or transactions involving premium currencies?
• how easy is it for consumers to determine the real-world monetary value of any item displayed on screen?
• does your contractual documentation (such as developer agreements, end-user license agreements, and associated terms and conditions) cover in-app payments and transactions involving premium currencies?
• do your contracts treat in-app payments and transactions involving premium currencies differently to other digital transactions?
• are consumers able to seek returns and refunds for items purchased in-app/in-game, including where the transaction involves premium currencies? How easy or difficult is it for the consumer to successfully carry out a return or refund?
• are controls in place to protect children from making unwanted payments?Do these controls reflect current practices or are they future-proofed?

Winter 2024