The “Market Guardian Experts” organization (Marktwächter) of the Consumer Protection Association Rhineland-Palatinate (“CPA RP”) announced that it has sent a cease-and-desist letter to two mobile game providers, Outfit7 Limited and Green Tea Games Limited, for an alleged violation of child-related advertisement laws. According to the CPA RP, the two mobile games offer in-app purchases for a price of up to 109.99 Euros and promote them with obtrusive pop-up advertising throughout the game.
1. Summary of the decision and arguments
Outfit7 Limited received a warning letter for the mobile game My Talking Angela, in which the player adopts and raises a virtual kitten. Due to its design and the special range of games on offer, "My Talking Angela" was considered as being aimed specifically at children of primary school age, especially younger girls. To raise the cat faster or buy virtual accessories, users can purchase in-game currency in the form of diamonds and coins. According to the CPA RP, the cost of a single purchase can be up to 99.99 euros or 109.99 euros, depending on the operating system.
Green Tea Games Limited on the other hand operates the game app Dog Run. In this jump-and-run game, the user slips into the role of a puppy dog which has to jump over various obstacles to avoid being caught. While doing so, the user collects coins. Again, the CRP RP criticized the game would permit the expenditure of up to EUR 99.99 by executing only one click.
Furthermore, the CPA RP criticized that both games use flashy pop-up advertisements to encourage users to make in-app purchases. Additionally, the in-game purchases would be advertised with slogans such as “Super Discount” (Super-Rabatt) as well as high discounts and digital discount countdowns. The CPA RP criticized that such appeals would encourage children to personally and spontaneously purchase in-game items without being able to critically evaluate the offer. Hence, the CRP RP called upon both app providers to put an end to what they consider to be unfair practices.
According to the CRP RP both games would be rated USK 0 and target minors due to their overall design. The CRP stated: “High amounts for in-app purchases are no rarity. It is unacceptable that one hundred or more Euros can be spent with one click in a gaming app designed for children. Cases where children have spent several thousand Euros in gaming apps have been reported to us repeatedly.”
In just a few weeks this is the second time that a German consumer protection association sent a warning letter to a video gaming company in relation to business practices relating to children. About a month ago, Sony received a warning letter for its PSN terms of service which allegedly violate the German laws on standard business terms (Allgemeine Geschäftsbedingungen).
2. Legal Assessment
The most relevant provisions in terms of in-app purchases are Sec. 6 (2) no. 1 of the Interstate Treaty on the Protection of Minors (“JMStV”) and Sec. 3 (3) of the Act Against Unfair Competition (“UWG”), which contain (essentially) the same requirements: Advertising shall not contain direct appeals to buy or rent goods or services directed at children or adolescents exploiting their inexperience and credulity. Thus, such advertisements are prohibited if two - or in case of Sec. 6 (2) no. 1 JMStV three - conditions are met: a) Direct purchase appeal, b) targeted towards minors and c) to exploit their inexperience and credulity.
a) Direct appeals to purchase
In-game purchases are not automatically a direct appeal to purchase a product. Instead additional circumstances must apply. The standard case are slogans such as “Get it now!”. Pop-up windows and discounts without such catch-phrases can, but do not necessarily fall under this requirement. This must be assessed on a case-by-case basis and depends on the design and placement of the offer. Merely offering items for a high price does not automatically constitute a direct appeal.
Explanation: Because advertising is always intended to encourage the purchase of products, not all advertising aimed at minors is automatically prohibited, but only advertising that constitutes a so called “direct purchasing appeal” towards them. Direct purchasing appeals to buy or rent products are all direct invitations to purchase or rent goods or services against payment which are transmitted to the consumer by words, gestures or other displays. In any case, this includes catch-phrases like “Try it out!”, “Get it now!”, or “Get yourself the new edition!”, etc. However, merely offering in-game purchases in a game designed for minors cannot automatically be considered as a direct appeal towards minors to purchase the relevant item. While this is subject to some debate, superior arguments speak against such an interpretation. Otherwise any (physical) product for children exhibited in a shop window of a toy store would need to be considered as an illegal direct purchasing appeal towards minors. However, the above-mentioned regulations aim at protecting minors only from particularly obtrusive purchasing appeals and against the exploitation of their inexperience. They do not serve the purpose of protecting them against the reality of any market economy where the offering of products is a natural and all-day occurrence. Thus, a direct appeal to buy a product does not automatically result from the fact that the game (or any other product) is aimed at minors. Instead there are two separate conditions for the advertising to be prohibited that must be strictly separated: the direct purchasing appeal on the one hand and it’s direction towards minors on the other hand (for the latter see below).
In order to constitute a direct appeal, additional circumstances must apply, such as the use of catch-phrases like “Try it out!” or similar obtrusive encouragements. Pop-up windows and discounts can, but do not necessarily fall under this requirement. This is subject to a case-by-case decision and depends on the design of the banner and whether it overall has the look and feel of a direct purchasing appeal that can be compared to encouragements such as “Get it now!”. A flashy pop-up banner designed in a color appealing to minors stating, for example, “500 diamonds for EUR 99-” might meet the requirement of being directed towards minors (see below) but does not necessarily also have to present a direct appeal which exploits the minor’s inexperience. Again: These are two requirements and mere purchasing offers are not prohibited under the regulation. There seems to be some room for the argument that the consumer association confused these two requirements. Also, the fact that the CPA RP refers to the price of the in-game items seems questionable. At least in relation to the prohibition of direct purchasing appeals, a high purchasing price is not an indication for a direct appeal. In fact, there are countless products on the market, including products for children, which cost more than 100 Euros. This is not relevant. Relevant is only whether the offer constitutes a “direct appeal”. A high price, however, has no significance in this regard. The same applies to discounts which are also a common reality of any market economy. The mere fact that something is reduced in price does not automatically mean that any offer related to the discount is an obtrusive “direct appeal” to purchase the product.
b) Targeted towards minors
Direct purchasing appeals are not automatically prohibited. Only if they are directed towards minors they are. Decisive for the assessment is whether minors might feel particularly addressed by the purchasing appeal due to the overall design of the advertising/in-app purchase offer. Whether the in-app purchase or advertisement exceeds the limits of what is permissible again depends on the individual case. A low age-rating alone, however, is no reliable indication that a game and consequently an included advertisement or in-game purchase option targets only minors. On the other hand, when a game is without any doubt directed at minors, the advertisements included in the game would most likely also be considered as such according to German case law. However, it needs to be borne in mind again that this does not automatically suggest that the advertisement or in-game purchase offer is illegal. Only if the advertisement also constitutes a “direct purchasing appeal” it is (cf. above).
Two cases are relevant for the interpretation of this requirement:
aa) Federal Supreme Court on Runes of Magic
In 2013, the court issued a landmark decision on direct appeals towards minors in a similar case. The case settled litigation on an advertisement included in the free-to-play game Runes of Magic which was also challenged by a German consumer association. The consumer association claimed that the game violated the restrictions for advertising vis-à-vis minors and, more specifically, that it contained an unlawful direct appeal to minors to buy products or services. The advertisement used the following slogan:
“Pimp your character week.
Is your character ready and set up for the coming adventures?
Thousands of dangers are awaiting you and your character in the world of Taborea. Without appropriate preparation any edge of the dungeon could be the last step.
This week you have another chance to pimp up your character!
Seize the good opportunity and give your armor and weapons that certain 'something'”.
The Federal Supreme Court held that this sentence, by its context and language, was a direct appeal targeted at minors and therefore violated the prohibition of direct exhortations to minors. Arguments by the court:
- The advertised product: The court implied that a fantasy RPG is mainly a product directed towards minors. Related advertisement would therefore be automatically directed towards minors as well. However, the court did not go into any detail in this regard. Instead it only claimed that “[f]rom the relevant perspective of the addressed persons, the appeal at hand is from the beginning on not directed only to a limited circle of addresses of minors over 14 years of age […] but instead to underage players in general based on the advertised product.“ This argument was heavily criticized as there are several studies available that suggest that the majority of gamers are indeed adults and not minors.
- The language used: A central argument for the Federal Supreme Court was the language used for the advertisement slogan. The German language contains two different words to address another person, one being informal and used in particular vis-à-vis minors and close friends (“Du”), while the other is more formal and used in particular vis-à-vis other adults (“Sie”). The advertisement used the informal language. Though the Federal Supreme Court explicitly stated that using the informal language does not automatically mean that an advertisement is directed towards minors, it held that the overall presentation of the advertisement in conjunction with the applied informal language was directed vis-à-vis minors. This argument was also heavily criticized as especially internet communication is traditionally less formal. However, the Federal Supreme Court also held that the remaining language of the slogan was primarily directed at children as it would use “terms typically used by children, including common Anglicisms” (note that the only two Anglicism used in the original German advertisement were “pimp” and “dungeon”).
bb) High District Court Berlin on World of Warcraft
Shortly after the above mentioned decision by the Federal Supreme Court, the High District Court Berlin (Kammergericht) ruled on a similar matter quite differently. The case concerned a marketing slogan for World of Warcraft:
“Buy at the pet shop
New exclusive riding animal: Armored Blood Swing – GET IT NOW
This monstrous, flesh eating bat is the perfect companion for a detour to the next battlefield in order to bring death and destruction.”
While the court agreed that the slogan constitutes a direct appeal, it did not find that the slogan was also directed towards minors. The court argued that its decision would not contradict the land mark decision of the Federal Supreme Court (which is Germany’s highest civil law court). Instead, the ruling would specify the requirements set out by the Federal Supreme Court and would simply apply them to another case. Nevertheless, the decision is considered as easing the rather vague requirements set out by the Federal Supreme Court. Arguments by the court:
- The advertised product: The mere fact that the advertisement relates to a video game which includes a colorful fantasy world with typical fantasy creatures is not sufficient to assume a direct purchasing appeal vis-à-vis minors as this characteristic applies to the majority of video games, no matter whether they are played on a console or a smartphone. Thus, it is not apparent that fantasy games are directed only towards minors. In fact, the court explicitly states that based on its experience quite the contrary would be the case. The Runes of Magic decision by the Federal Supreme Court would not say that any fantasy game explicitly targets minors. Instead this question would need to be assessed on a case-by-case basis.
- Payment methods: The fact that the game operator also enables persons who do not own a credit card or bank account to participate in the game by offering pre-paid cards which can be used for game time or game accessories also does not automatically establish that the advertisement is directed at minors. According to the court, such pre-paid cards can also be used by persons who like to avoid that their bank account or credit card is charged. More importantly, there would be no direct connection between the use of pre-paid cards and the advertisement at hand.
- The language used: The use of the informal language alone is not sufficient to assume that the advertisement is directed vis-à-vis minors. According to the court, the use of the informal language in advertisement towards adults is common as well. Whether the use of the information language indicates an advertisement which is directed towards minors must therefore be decided on a case-by-case basis. The remaining language used in the advertisement does not imply that it is directed only towards minors (the court provides several examples at this point). Furthermore, the product description would not consistently rely on the informal language and instead occasionally switch to the formal language. The advertisement at hand additionally does not make use of terms typically used by minors, e.g. terms which make the advertisement sound less square.
Based on the outlined cases, both games that were criticized by the CPA RP would most likely be considered as being directed towards minors by a German court. Consequently, any advertisement or in-game purchases would also be considered to being aimed at minors. This is, however, not due the low age-rating of the game but because of the overall presentation of the games which are designed in flashy colors, present mostly kids related themes and overall appeal to minors. However, as outlined under 2. it is not sufficient that the game is directed towards minors. It is also required that the advertisement or in-game purchase offer constitutes a direct appeal. For reasons provided under 2., this seems at least questionable.
c) to exploit the child’s or adolescent’s inexperience and credulity
Finally, Sec. 6 (2) no. 1 JMStV requires that the direct purchasing appeal also exploits the inexperience and credulity of the minor. This is the only additional requirement in comparison to the parallel provision of the UWG (cf. Sec. 3 (3) in conjunction with No. 28 Alt. 1 of the Annex). However, the practical significance of this requirement is low. In the case of children (i.e. minors under the age of 14), the inexperience and credulity are typically assumed. In the case of adolescents (i.e. minors over the age of 14), the exploitation of inexperience and credulity must be positively determined. However, the threshold to meet the requirement is not particularly high.