In recent years, the increasing popularity of social media and social networks has led to the increased availability to Australians of a “new” genre of games that have become integrated into those networks. These games, commonly known as online social games, add a new social experience to gaming. In many respects, they are based on the same easy to learn and casual play model as many traditional games.
The growth of the online social games industry has led to some concern, due to their similarity with certain types of interactive gambling services which are illegal in Australia. However, there is a clear legal distinction between the two.
What are Social Games?
Social games are still a relatively new concept and, as such, there is not yet any universally-agreed definition. However, there are some features that characterise an online social game.1
Based on social platforms and communities
One of the key features is that an online social game is offered and hosted on social networking platforms (such as Facebook) or on online social gaming platforms (such as Xbox Live).
Available for access readily through mobile phone applications and mobile social networks
As mobile technology develops, more online social games are being offered on mobile devices such as mobile phones and tablets. Social networks such as Facebook, are also becoming more accessible on mobile devices. As a result, online social games are more readily available, enabling players access to online social games wherever and whenever they wish to play.
Prominent social aspects and heavy emphasis on social interaction
Another key feature of online social games is that they allow players to communicate and interact directly with one another, creating an awareness of another player’s presence, actions and achievements and providing the ability for multiple players to play at the same time.
Online social games are designed generally to be played purely for entertainment on a casual basis and not for long, intense periods. Some studies have suggested that the typical online social gamer is looking for a “pleasant boredom through repetitive activity with low suspense, low cognitive load and low emotional intensity.”2
Online social games usually involve simple step-by-step tutorials and repetitive tasks and are easy to play even on mobile smart-phone platforms. This ties into the casual gaming aspect of online social games.
Free to play
The large majority of online social games, particularly those available on social network sites, such as Facebook, are available on a free-to-play basis. That is, players only need to download the application and there is no cost to play the game.
Many of the games offer the opportunity to make in-game purchases to enhance the game and entertainment. For example, popular Facebook game, “Farmville”, allows users to extend play by purchasing more land while, in Smurfs’ Village, players can use real money to purchase “Smurfberries”, the form of virtual currency that allows players to purchase game items.
Concerns about Online Social Games
Online social games are legal in Australia. However, concern has been expressed about certain online social games that feature a casino-style or gambling-like content.
Over the past few years, Senator Nick Xenophon has stated that online social games constitute gambling and are therefore prohibited by the Interactive Gambling Act 2001 (Cth) (the IGA). Senator Xenophon has stated that these games are “identical to poker machines and they are easily accessible by young people – habituating them to electronic gambling, particularly poker machines.”3 Accordingly, it is necessary to consider the legal status of these games by reference to the current legal framework.
Online Social Games are not gambling
The supply and promotion of an online or “interactive” gambling service is prohibited expressly by the IGA. To fall within the scope of an interactive gambling service, the “game” must:
- Be a game of chance or of mixed chance and skill; and
- Involve consideration; and
- Be played for money or anything else of value.
The language of the IGA suggests that, if any one or more of these elements is missing, then the game does not constitute an interactive gambling service.
One major concern in relation to online social games that exhibit casino or gambling-like elements is that real money can be used to purchase virtual currency which can then be used to extend play or to receive an in-game reward. However, despite Senator Xenophon’s suggestions that this amounts to gambling and therefore must be banned, a number of prominent government departments and bodies have reached the view that online social games do not amount to gambling.
The vast majority of online social games available for participation on social networking platforms such as Facebook do not fall within the IGA’s definition of “interactive gambling service” as they are played for free and, even if there is an initial purchase, the games do not allow players to receive a prize in the form of money, or in a form that can be exchanged for money or anything else of value. It is therefore arguable that online social games fail to satisfy the second and third requirements of a “gambling service”.
This position was confirmed by the New South Wales Law Reform Commission (the NSWLRC) in its August 2011 report entitled Cheating at Gambling.4 It stated that the virtual currency which could be won in such games was akin to the free balls that are released when a certain score is reached in a pinball machine game. The NSWLR concluded that these free balls and virtual currency cannot be exchanged for real money and are not things of value and therefore, the games are not gambling.
A similar conclusion was reached by the Australian Communication & Media Authority (the Federal agency responsible for the initial investigation of complaints relating to possible contraventions of the IGA) (ACMA) in December 2011, when ACMA responded to a concern by Senator Xenophon in relation to the legality of free online casino-style games (such as roulette and blackjack) offered by DoubleDown Casino.
ACMA confirmed that DoubleDown Games did not meet the third requirement on the basis that it was not possible to win money or anything else of value through playing the DoubleDown Games and that there is “no facility to convert or cash out the virtual currency accumulated during game play into real currency.”5
Finally, in the Final Report of its Review of the IGA released in March 2013, the Department of Broadband, Communications and the Digital Economy (the DBCDE) confirmed that “the distinction between these [online social] games and gambling is that there is no cash prize on the outcome and no cash at risk during the game.”6 This reiterates the Australian position that online social games do not constitute gambling and are not prohibited by the IGA.
Impact on minors
Even though online social games have not been considered to meet the definition of a gambling service, concern has been expressed that the increased exposure to games that contain gambling-like content contributes to the normalisation of gambling behaviour in children and increases the prevalence of problem gambling behaviour in later life.
This concern was raised in the DBCDE Final Report which refers to “Recent research that exposure to gambling- style games at a young age is a predictor for the later development of problem gambling behaviour”7 and the suggestion that “growing evidence that the lower the age that people are exposed to gambling, the more likely they are to gamble as adults.”8 The issue has also been raised as an area of community concern, in particular by a number of Australian politicians, including Senator Xenophon and Senator Richard di Natale.9
However, the DBCDE stated in its Final Report that research to support the view is “at an embryonic stage.” Accordingly, the DBCDE indicated that further research is required to inform properly any policy decisions on issues in the area and in particular, to inform any decisions in relation to the regulation or the introduction of a ban on these online social games.10 This view was also stated in the Final Report of the Joint Select Committee on Gambling Reform (the JSCOGR) (see below).
Ease of access by minors
A related concern relates to the impact of these online social games on minors due to the ease with which minors are able to access the games.
As the DBCDE indicated in its Final Report, this is illustrated in the case of in-app purchases where “concerns have been raised regarding children purchasing smartphone and tablet applications, including applications containing gambling-style elements, and the ease and speed with which they are able to make additional purchases within these applications (in-app purchases),11 often without parental knowledge and permission. However, the DBCDE indicated that further research into the issue is required.
It is important to note that online social games are distinct from social media and social networking websites. Online social games are content based and produced by game developers and publishers, while, in contrast, social networking websites do not develop the game, but rather provide the platform to host the game. In other words, it has been suggested that it is the social platforms that provide the access to the online social games, not the game developers.
This raises the question of whether, to the extent it is concluded that additional regulation to protect minors as a result of their use of social games is required, that regulation should be imposed on platform providers.
Government and political response
Australian government departments and bodies have confirmed that online social games are legal and are distinguishable from online gambling on the basis that they do not constitute an interactive gambling service and therefore are not subject to the prohibitions in the IGA.
To address community concern about the impact on, and accessibility of, online social games to children, the DBCDE recommended that the best way to approach the issue will be to consult with relevant social media sites (such as Facebook) and other platform providers (such as Xbox live), mobile content providers (such as Apple and Google’s Android) and online game developers.12
As a result, the Minister at the time, Senator Stephen Conroy, wrote to content providers (i.e. game developers), social media platform providers and other industry stakeholders to inquire how they are currently dealing with and managing concerns that have been raised and to encourage them to monitor closely the impact of their user policies regarding the provision of these online social games, in accordance with a recommendation in the DBCDE Final Report.13
The Interactive Gambling Amendment (Virtual Credits) Bill 2013 (the Virtual Credits Bill)
In May 2013, Senator Xenophon introduced the Virtual Credits Bill into Parliament. The Virtual Credits Bill sought to amend the definition of “gambling service” in section 4(e)(i) of the IGA to state that “anything else of value” now includes “virtual credits, virtual coins, virtual tokens, virtual objects or any similar thing that is purchased within, or as part of, or in relation to, the game”.14
Senator Xenophon suggested that the current definition of gambling service did not cover activities where virtual items purchased with real money are then used by participants for gambling. As participants have no way to cash out their winnings, the games do not fall within the definition of a ‘gambling service’ under the IGA.
Accordingly, Senator Xenophon indicated that the Virtual Credits Bill aimed to provide protection for consumers in respect of the concerns noted above, including the impact that these games may have on children and the ease with which children access the games, as well as the potential for these games to cause players to develop problem gambling behaviours.
The Joint Select Committee on Gambling Reform Final Report
The Virtual Credits Bill was referred to the JSCOGR for further review. In June 2013, the JSCOGR released its Final Report that discussed the Virtual Credits Bill.15 The JSCOGR ultimately recommended that the Virtual Credits Bill should not be passed and was supportive of the findings of the DBCDE in its Final Report.
In particular, the JSCOGR16 acknowledged the lack of research and empirical evidence in the area of social media and online social games and stated that further independent and nationally consistent research was required to assist with the development of effective policy responses, before any legislation is passed.
The majority of the Committee supported the findings in the DBCDE Final Report by concluding that there is considerable difficulty in defining the characteristics of the games that should be banned in a manner that does not capture inadvertently other games. They also commented on the difficulty in enforcing any ban, given the global nature of the platform providers and game developers, and the lack of a similar prohibition in other international jurisdictions.
The Liberal-National Coalition Policies
In the course of the Australian Federal election campaign, the Liberal-National Coalition (the Coalition), now the Australian Government, introduced two key campaign policies.
The Coalition’s Policy to Enhance Online Safety for Children indicated the Coalition’s intention to strengthen online safety measures to “protect their children from inappropriate material”.17 These proposed measures include:
- the introduction of internet “adult content filters” that will allow consumers to “opt-in” and turn on these filters on their mobile phone and tablet devices or home based internet to filter out “inappropriate material”;
- establishing a new Children’s e-Safety Commissioner, with responsibility for monitoring online concerns in respect of children; and
- the introduction of a new complaint system, backed by legislation, aimed at removing “harmful material down fast from “large social media sites””. The Coalition policy indicated that, as part of this new complaints system, the Children’s e-Safety Commissioner would have the power to direct material to be taken down from the “large social media sites”.
Whilst the policy does not clarify the scope of “adult content” or “inappropriate or harmful material,” these measures, particularly the new compliant system, may apply to the online social games sector insofar as they advertise and offer social games on “large social media sites”.
The Coalition also announced its Helping Problem Gamblers Policy (the Gambling Policy).18 This sets out the Coalition’s position on problem gambling. The Coalition has indicated that current laws prohibiting certain forms of online gambling (online poker and casino games are mentioned expressly) are not being enforced adequately, and that the Coalition will be investigating methods of strengthening the IGA. The Coalition has also indicated it will establish an industry advisory council comprised of representatives of clubs and gaming venues to meet quarterly with the responsible Minister.
It will be important to monitor developments that result from the implementation of these Policies. Care will need to be taken to ensure that the distinction between online social games and online gaming remains clear and that the online social games sector is not unduly covered, inadvertently or intentionally, by proposed amendments to the IGA or considered to be part of the gambling industry by the industry advisory council.
Ultimately, issues of definition and enforcement, as well as the lack of research and empirical evidence, have been identified as key concerns that require further consideration by all stakeholders before consideration can be given to whether any formal regulatory control should be implemented. While there is consistent support for the conclusion that online social games should remain legal in Australia, it is important for organisations operating in the online social games space to maintain the demarcation between online social games and online gambling.
Recent public and political concern has been directed towards the impact of online social games on children. Accordingly, it is necessary to ensure that children and vulnerable people are protected and it will be important for industry stakeholders to demonstrate that they are proactively monitoring this issue.
For game developers, it will be important to reiterate that they are not targeting inappropriately or misleading children and that their games do not encourage gambling behaviour but instead are focused on merely being a casual form of entertainment. For the online social platform providers, it will be essential to review their user policies and ensure that they have appropriate preventative mechanisms (such as age verification procedures) in place to deal appropriately with the accessibility of online social games by children.
Finally, the online social games industry has taken steps to act collectively in dealing with these issues. For example, the International Social Games Association19 has recently been formed to act as the unified international voice of the online social games industry, and to assist in facilitating education and discussion between members of the industry (such as game providers and platform providers), policy makers and regulators and the public.
However, the concerns illustrated in the dissenting report of the JSCOGR remain and it will be interesting to determine whether the legal distinction that exists currently remains clear with online social games remaining legal in Australia and beyond the scope of the prohibitions in the IGA.