Earlier last month, United States Senator Josh Hawley (R-MO) pledged to introduce legislation to combat microtransactions in games that were marketed to children. Senator Hawley soon followed through by introducing the Protecting Children from Abusive Games Act with bipartisan support from Senators Ed Markey (D-MA) and Richard Blumenthal (D-CT).
On its face, the Protecting Children from Abusive Games Act seems like a reasonable piece of legislation. However, I am very much not a lawyer, and some passages of the bill's text raised questions that I was ill-equipped to answer. That's why I reached out to Ryan Morrison of Morrison Rothman LLP and Zachary Strebeck of Strebeck Law, two attornies who specialize in the legal issues surrounding video games and digital entertainment. (Morrison Rothman LLP Associate Adam Gertz composed the majority of the responses from his firm.)
Unfortunately for all of us, Senator Hawley introduced the Protecting Children from Abusive Games Act on the Friday before Memorial Day weekend. After some time, the two of them got back to me. It turns out the what I had thought was a pretty clear-cut bill ... isn't so clear at all.
The Legality of Selling Cosmetics
Under 2 (7) (B) "Exclusion", it states that cosmetic alterations are excluded from this legislation. However, many games like Overwatch and Apex Legends contain cosmetics within loot boxes. Am I correct in assuming that games using this system would be allowed to sell cosmetic microtransactions to gamers under 18, but not if they use a loot box system or any other randomization?
Let's start with one of the easier bits. The Protecting Children from Abusive Games Act appears to carve out an exception for selling cosmetics with the condition that you know what you're buying. Is this as straightforward as it seems?
"Correct," stated Zachary Strebeck in response to my question. "Selling them directly to a player of any age seems to be completely legal under the law, as long as the know specifically what cosmetic alteration they're purchasing."
Adam Gertz, however, had a more nuanced opinion of this section of the bill.
"I think this is a [two-part] question, because it also implicates the general legality of selling anything to children," Mr. Gertz began. "To start, as it's currently written, the bill would not prohibit selling the described items to gamers under 18. Rather, it would be a blanket prohibition against PUBLISHING or DISTRIBUTING any game that includes these transactions, where the game is specifically targeted to minors or where the publisher/distributor has constructive knowledge that minors play the game."
"[...] under the bill it seems that a game could be published or distributed where it is possible to participate in [non-random] microtransactions for cosmetic items, but not if those cosmetic items appear in randomized loot boxes," he continued. "However, the bill would likely only outlaw the publication or distribution of games that offer loot boxes for sale, rather than make them available based on player achievements. "
One other point Mr. Gertz raised was that of COPPA, the Children's Online Privacy Protection Act. Among its many functions, this law's effects are most readily recognized by the layperson with its mandate for age checks for content that isn't suitable for minors.
"The reason I said this is a [two-part] question is because, under COPPA, publishers still need to obtain parental consent to 'sell' cosmetic items, even if the purchasing of such items was not random, to children under 13," Mr. Gertz concluded. "This is a basic definition and I won't go into additional detail here, but it is something the industry always needs to consider."
How are Subscription-based Games Affected?
Under 2 (6) (B) "Exclusion", the bill allows for subscription-based games to exist "provided that users do not have the option to pay different amounts to access the same content in order to unlock a feature of the product or to enhance the entertainment value of the product." Does this mean that the discounts for purchasing subscriptions for multiple months that many MMOs offer would be illegal, or is this more intended for things like experience boosters and the like?
Both Mr. Gertz and Mr. Strebeck essentially agreed that the intention of this section of the Protecting Children from Abusive Games Act was intended to combat things like experience boosters and the like. However, they also both agreed that this particular section of the law was worryingly vague.
"This section definitely requires clarification and, on its face, is very problematic," Mr. Gertz began. "I cannot speculate as to the bill's 'intent,' but as I read it, it is not necessarily outlawing variable cost subscription fees. The bill reads that subscription fees are excluded provided that users 'do not have the option to pay different amounts to access the same content in order to unlock a feature of the product or enhance the entertainment value of the product.'"
"This is admittedly difficult to comprehend," he continued. "I believe that it means that all subscription fees should be uniformly priced. I would argue that, even in the case of discounts based on quantity of months purchased, the prices, as discounted, would still be uniform for each player depending on how they chose to engage the subscription. But there is a strong argument for, as you mentioned, that the very fact that some users would be paying more per month than others is enough to cause such fees to be illegal under the bill."
"[...] I don't think a volume discount would necessarily provide the competitive advantage so I think the language is likely more intended for experience boosters, etc, but as I said, it is vague and should probably be removed or reworded," he concluded.
Mr. Strebeck has a similar outlook on this particular section of the bill.
"I believe that the INTENTION of the law is to deter someone being able to pay a higher amount in order to get some added benefit with the "same content" - meaning, you've bought the same new levels, but you have extra boosts that 'enhance the entertainment value of the [product],'" Mr. Strebeck stated. "I think that it is too vague and covers too many cases that are not within the spirit of the law."
Are 18+ Games in the Clear?
The bill states in the opening sections that publishers/distributors can be found in violation of the law if they have pay-to-win microtransactions and/or loot boxes alongside "constructive knowledge that any of its users are under the age of 18." Could these entities deliberately avoid collecting information on a player's age to comply with the law?
Would an "Adults Only" (18+) ESRB rating be enough of a defense against falling afoul of this law, or would game developers/publishers have to police their game in some fashion to ensure that minors were not playing it?
Regarding the first question, both Adam Gertz and Zachary Strebeck educated me on the difference between "actual knowledge" and "constructive knowledge." In short, while the developers could avoid collecting age data ("actual knowledge"), they may have failed in their due diligence to comply with this law by not doing so ("constructive knowledge"). Furthermore, COPPA may mandate that they collect age data anyway, so it's unlikely that avoiding collecting age data would be a potential way of mitigating the Protecting Children from Abusive Games Act.
As for the second question, even developers who clearly intend their games for adults may have issues to deal with. An AO rating might not be enough to keep them in the clear.
"[An AO rating would not necessarily be a defense], because you could have a situation where the game's characters are specifically appealing to children (see the various criteria in the law and in the COPPA law which that criteria is based on), despite the actual in-game content being "adults-only," said Zachary Strebek. "The game would be targeted at minors, even though they're not technically allowed to play it. As an analogy, think of Joe Camel, the cartoon camel who was used to sell cigarettes back before you were barred from using cartoons to sell cigarettes."
"Probably not[,] [...] constructive knowledge would still apply in that sense," Adam Gertz began. "Of course, this means that most, if not all games would be implicated by this law. Since 'constructive knowledge' involves a 'should have known' standard, you are most likely correct regarding the self-policing."
"If a publisher creates an AO game, but has any reason to believe that minors have access to it, they would likely need to perform some sort of investigation and/or put up additional barriers to prevent minors from playing it (e.g. verifiable age check software or similar)," he continued. "Additionally, most stores and online marketplaces do not carry AO Games. Therefore, the loss of revenue that a publisher would likely experience from creating a game that the ESRB would rate as AO would more than likely offset any gain from the inclusion of loot boxes."
Will Foreign Companies Have to Follow This Law?
Suppose that a company made its game available in the United States and violated this law, but they had no headquarters or assets in the U.S. How would such a violation typically be handled?
How would foreign companies have to comply with this law (if at all)? Adam Gertz and Zachary Strebeck were all too happy to lay it out for me.
"If the games were available in the U.S. the publisher/developer would likely be availing themselves to the jurisdiction of the U.S. court system," stated Adam Gertz of Morrison Rothman LLP. "Thus, a foreign publisher/developer could be sued in the U.S. so long as the cause of action related to the U.S. based purchases. See e.g. Helicopteros Nacionales de Columbia, S.A. v Hall, 466 U.S. 407."
"However, If the company has no assets in the U.S., any [judgment] would have to be enforced in the country in which the company does have assets," he continued. "This makes things more difficult and would have to be handled on a case-by-case basis. Obviously, it depends on the country. A [judgment] against a Canadian company, for example, would likely be easier to enforce than a judgment against a Chinese company."
Zachary Strebeck had something to add to this question as well.
"This is what 'long arm statutes' are generally in place for," Mr. Strebeck said in response. "As long as you have 'minimum contacts' in the state or country (and the sales you mention would count), you could be sued in the US. See https://en.wikipedia.org/wiki/Long-arm_jurisdiction"
Of course, there's a difference between being sued in the United States and actually being able to collect. One thing that's well known in the gaming community is the unfortunate situation where some games are cloned or outright copied by developers in foreign countries that effectively don't care about U.S. Law. It remains to be seen what would be done if such a case arose under the Protecting Children from Abusive Games Act.
Is the Protecting Children from Abusive Games Act Legal?
To the best of your knowledge, would any portion of this bill be unenforceable due to existing laws, regulations, or policies should the bill pass and be signed into law by the President?
My final question was perhaps the most complex of all. The legal system has a bunch of moving parts, and a new law may in fact be superceded by an existing law — nevermind the Constitution. With that established, should the Protecting Children from Abusive Games Act pass — would it be legal, or would some or all of it end up being struck down by the courts?
"Video games qualify for first amendment protection," Adam Gertz began. "Brown v. Entertainment Merchants Ass'n, 131 S. Ct. 2729, 2733 (2011). Thus, the strongest argument against this legislation is likely that is an overbroad restriction on speech. Under Ashcroft v. ACLU, which looked at the original iteration of COPPA (back when it was COPA) the Supreme Court held that legislation is unconstitutionally broad when a less restrictive means would accomplish the same purpose. 542 U.S. 656, 665 (2004). The original COPA criminalized knowingly posting online web content that was harmful to minors. Id. at 661. The Court held that this was overbroad because it imposed universal restrictions on the source of the speech, rather than selective restrictions on the receiving end. See id. at 667. There may be an argument that this bill does the same thing, given the breadth of the 'constructive knowledge' requirement."
"However," he continued, "the bill does also exclude certain things like additional game content from the [microtransaction] prohibition, so the question becomes whether the content that the bill does purport to outlaw qualifies as speech. Given this, as well as the fact that Congress has the power to regulate commerce, there are strong arguments on both sides of the issue. In short, the answer to this question requires a deep constitutional analysis, but these would likely be the chief arguments from each point of view, at a high level of generality."
In closing, it seems that there may be some substantial issues with the Protecting Children from Abusive Games Act, well-intentioned as it may be. Legislation against microtransactions and loot boxes seems all but inevitable, but it's going to have to be able to survive legal challenges.
"I think that this law is well-intentioned, but goes a bit far," Zachary Strebek said. "If it moves forward, I think that it will be pulled back a bit with revisions and input from the industry."
"Also, the bill mandates a study on various issues related to loot boxes/microtransactions to be conducted within 2 years of passing the bill, but it seems to me that the time to conduct this study would be BEFORE enacting a law about it. Don't you think?"
Good points were raised all around. I asked what I had thought were relatively simple questions. What I found was that the Protecting Children from Abusive Games Act may not be the best way to combat microtransactions and loot boxes that are perceived to be predatory.
I'd like to thank Zachary Strebeck, Ryan Morrison, and Adam Gertz for taking the time to respond to my questions. Senator Hawley's bill has yet to be submitted for a vote at the time of writing. If it manages to make it to President Trump's desk and gets signed, the next few years are sure to be filled with interesting legal challenges.
What do you think of the Protecting Children from Abusive Games Act? Do you think the issues raised by Ryan Morrison, Adam Gertz, and Zachary Strebeck can be hammered out before the bill gets made into a law? Do you think the act will pass? Let us know in the comments below!