Impact of the EU’s Digital Content Directive on the Video Games Industry

Briefing

For a long time, the legislators only had the offline world in mind. Hence, applying the laws to the online world sometimes appeared awkward or at least more difficult.

The gap between the “ancient laws” and reality rarely is as obvious as when it comes to dealing with legal aspects related to the Video Games Industry. Well, times seem to change now.

What is the background of the EU’s Digital Content Directive?

The Digital Content Directive¹ (the “Directive”) is an instrument to (further) harmonize consumer contract law across the EU. It has been adopted in order to get one step closer to full coverage of digital content and a future-proof system. Thus, the scope of the Directive was defined very wide does apply regardless of the underlying technology.

Have the EU Member States already implemented the Directive properly?

The EU Member States’ transposition deadline is 1 July 2021. The local transposed measures are to be applied by 1 January 2022.According to the official transposition status tracker, only Bulgaria, France and Austria seem to have published the transposition law by 1 July 2021.In Germany, the draft law has passed most of the legislation steps, but has not been passed and published yet. The last circulated version of that draft seemed to mirror the Directive’s wording quite closely.

How does the Directive affect the Video Games Industry?

The Directive will affect the Video Games Industry in particular, especially with regard to the following aspects:

Digital content

Video games that can be obtained for a fee as such, no matter if distributed via hardcopy or download
Downloadable content (DLCs), such as new maps or quests, additional skins, or otherwise extended game content

Digital services

In-game “purchases” (virtual items or virtual currencies)
Free to play video games
Season passes
Other games-as-a-service models

What about free games?

The Directive not only applies to games, content or services that can be obtained for a fee. It also may cover “free” games, content or services if three conditions are met:

The consumer “pays” for using the game, content or service by providing personal data (within the meaning of the EU General Data Protection Regulation). In the video game context, personal data are processed, for example, as soon as a consumer has to register (e.g. with an email address or social media account) to be able to play a video game or receive in-game bonuses.
The consumer’s personal data (e.g. name, email address, social media account data) are used for other purposes than the simple provision or improvement of the game, content or service. The evaluation of metadata or statistical data, like the challenge rating of a certain boss, therefore is not a “data payment” in that sense.
The video game company does not only process the respective personal data in order to comply with legal requirements or to provide/improve the game, content or service.

In general, whilst large parts of personal data in connection with gameplay may be collected to provide or improve video games or evaluate them based on meta data, monetization phantasies of video game publishers do not stop at purchase prices. Also, in-game advertising is on the rise – the currency often being player data.

Thus, video game companies will need to assess very carefully whether a “free game” actually is considered “free” or whether it’s hidden monetization strategies lead to it being considered “paid with personal data” – rendering the Directive applicable.

What are the obligations of video game companies under the Directive?

Under the Directive, video game companies not only need to comply with contractual obligations, but also with certain so-called subjective and objective criteria, such as:

A video game needs to meet the targeted players’ reasonable expectations regarding purpose of use, quantity and quality, possess the functionality, interoperability and other features required by the contract.

When assessing a player’s reasonable expectation, not only the official manual, but also every public statement by or on behalf of the video game company (e.g. from enthusiastic developers), trailers and any trial versions will be taken into consideration.
A video game needs to be supplied with relevant accessories, instructions (e.g. on installation) and customer assistance.
Updates promised by the video game company or which are necessary to further use the game, digital content or services, for either the duration of the provision or as long as players reasonably expect them to be, are mandatory.

The Directive itself does not provide for particular consequences in cases of non-compliance. The EU Member States will remain free to take care of that.

To what extent is a video game company liable under the Directive?

A video game company or a trader (to a lower extent) selling video games (e.g. a retail store) is liable when its games, digital content or services do not meet the above requirements. In such cases, the player can:

primarily ask for a replacement, improvement or rectification, provided this does not involve disproportionate effort of the video game company.
ask to proportionately reduce the price (of paid games, content or services).
after the video game company was given the opportunity for rectification, terminate the or withdraw from the contract about the game, content or service in case of significant non-conformity (like game breaking bugs).

Being located abroad does not allow a video game company to escape the provisions of the Directive. Contracts concluded between a player (in his/her capacity as a consumer) and a video game company are governed by the laws of the country where that player has his/her habitual residence.

How about modifications in EULA or other standard terms?

Where a game is provided as a service or otherwise made accessible over a period of time, the standard terms (e.g. ToS/ToU/EULA) usually reserve the right to modify the respective game. Under the Directive, the modification of the terms (beyond what is necessary to maintain its functionality) need to meet all of the following additional requirements:

The terms must allow for and stipulate a valid reason for the modification.
The modification is made without additional cost to the player.
Players are informed in a clear and comprehensible manner of the modification.
In case were the modification negatively impacts the player’s access to the video game, the player is informed reasonably in advance on a durable medium (e.g. by email) of the time of the modification and their rights (e.g. termination of the contract free of charge in case of major negative impact on the player).

Action Points for the Industry

As most EU Member States have not implemented local laws covering the requirements set out in the Directive, the period to deal with the local requirements will be very short. We recommend watching the most relevant EU markets with regard to the transposition laws and preparing to act on short notice as soon as the respective laws are published.

To achieve minimum compliance with the Directive¹, video game companies should start implementing compliance steps sooner rather than later. The most important first steps for compliance will be the following:

Business model: Assessing to which extent the Directive affects the business model, e.g. regarding consumer rights.
Business partners: Assessing publisher agreements and distribution agreements, e.g. regarding the business partners’ rights to advertise games, content or services independently.
Ads: Assessing ads and marketing campaigns with regard to the Directive’s requirements.
ToS: Updating the terms of service with regard to the above requirements, e.g. regarding the mechanism to modify the terms.
Communications and marketing: Finding ways to ensure compliance with the Directive (e.g. implementing guidelines or internal policies, offering trainings) in marketing campaigns, press releases and customer care communications.
Third-party statements: Finding ways to ensure compliance of attributable third parties’ (e.g. developers) public statements (e.g. via a compliance policy).