Online gaming regulatory practice in France – Part 1: T&C of video … – JD Supra

Hogan Lovells
[co-author: Anna Revidi]
The online gaming sector is characterized by various regulatory frameworks, that may or may not overlap depending on the type of games and means of distribution. There are a number of stakeholders on the value chain (developers, publishers, platforms, streaming services, streamers, professional gaming organisations, gamers etc.) and they all face different legal challenges. In this first (of several) publication, we address more specifically the compliance of gamer-facing terms and conditions of digital distribution stores & publishers ("T&C") with the French consumer protection regulations.
The contractual relationship between:
is normally subject to business-to-consumer ("B2C") regulations. The B2C regulations are not homogenous, even within the EU, where the main requirements derive from EU legislation. Either the national rules themselves, or their interpretation & enforcement vary from one Member State to another.
This creates a compliance challenge since a consumer based in France cannot be deprived from the protection offered to him/her under the French mandatory rules if the activities of the ‘professional’ are ‘directed’ to France. In other words, a video game platform established in the UK having T&C subject to the laws of England and Wales would still need to ensure compliance with the French (and EU) mandatory regulations (e.g. B2C and IP), if the video games are marketed to consumers based in France.
This has formalistic and substantial implications on the T&C. The T&C would not only need to comply with standard B2C considerations which are industry agnostic (e.g. double-click, consumer’s withdrawal or warranty of conformity rights), but also with online gaming related ‘unfair terms’ and IP considerations. As a reminder, under French law, an unfair term in a B2C context is a contractual term which creates a significant imbalance in the parties’ rights and obligations arising under the contract, to the detriment of a consumer.
A recent decision of the Paris Court of Appeals dated October 21, 2022 ("Decision"), adopted in the context of a French consumer protection association challenging the T&C of Steam (operated by Valve), sheds some light on certain online gaming industry specific T&C provisions.
The Decision analyzes three types of contractual clauses which are commonly found in T&C, namely those incorporating:
The Decision confirms the above provisions are, in principle, considered to be legal (and valid) to the extent their drafting and implementation comply with the applicable regulations. However, such provisions need to be drafted in a clear and transparent manner, in particular where the gamer is ‘giving away’ his/her rights. This is mainly for the two following reasons:
As such, for T&C incorporating similar mechanisms to those described above, video game platforms should keep in mind the following:
The underlying question is the following: does the supply to the public, through video game download, follow:
In this context, the Decision clarifies the legal regime applicable to the commercialization of video games online. Drawing analogies between video games and e-books (for which the European Court of Justice had ruled on a similar question), the Decision affirms that a video game is not only a computer program but a complex work comprising the software and many other creative elements such as music, graphics, script, trademarks or characters. Accordingly, a video game is to be protected, together with the entire work, by the copyright regime, and not the specific computer program regime.
In other words, the Decision confirms the validity of a clause in T&C prohibiting the resale and the transfer of video games on a dematerialized medium between gamers without the authorization of the right holder.
In France, IP assignments follow a quite formalistic regime, and are unusual in B2C context – whereas non-exclusive licenses are the market practice and entail less legal hurdles (i.e. with respect to validity, enforceability).
In any case, a particular attention should be given to IP provisions where they were not initially drafted in a French law compliant manner (e.g. waiver of moral rights, “perpetual” commitments). The scope and the limitations of the IP provisions should be drafted in a very clear manner, especially where the user-generated contents go beyond mere comments on forums, but includes game integrations (such as game mods, skins, workshop maps, etc.) or revenue sharing (if any). This applies regardless of how the video game publisher/distributor actually uses the rights granted in practice.
Online wallets/account functionalities for gamers can be implemented without necessarily being subject to robust e-money and payment services provider regulations (e.g. through pre-payment mechanisms on the platform). This requires ensuring that T&C and the wallet/account mechanics are clearly aligned and the functionalities are configured accordingly (e.g. closed loop without possibility to pay on behalf of third parties).
Non refund of amounts outstanding on gaming account at the time the gamer unsubscribes has created debate, gamers wishing to find ways to recover amounts. For instance, losing the balance of the account has been seen by some a form of termination penalty which could be deemed an ‘unfair’ term under B2C regulations.
The Decision confirms the validity of T&C allowing the platform to refuse refund of the balance in case of termination of the gamer’s subscription. But this feature must be very clearly communicated to the gamers, and no ambiguous “marketing-friendly” wording should be allowed in T&C or marketing material.
Non-compliance with the B2C regulations exposes digital distribution stores & publishers to not only consumer claims, but to public enforcement and consumer association claims. This may entail fines and damages, as well as T&C provisions being struck down because they are deemed null and void. If an IP provision securing rights on user-generated content to the game publisher becomes invalid, this may in turn cascade a number of other concerns on the use of such content: ranging from the game publisher not being able to use such content (e.g. the mod, the workshop map, the skin integrated in the game, etc.), potential breaches in cross-platform/licensing arrangements in relation to the use of such content as part of wider property being licensed, to very practical concerns of user experience due to game play being impacted.
A global video game digital distribution store & publisher must ensure that its B2C contractual standards are in line with the applicable mandatory regulations. This is seldom straightforward and might be cumbersome as the national B2C rules are getting more and more complicated. When addressing pan-European deployments of platforms, aligning to the strictest standards applicable to the gaming service is one of many approaches that can be adopted to avoid excessive localizations of user terms.
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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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