The EU Digital Content Directive will have severe implications on the video game and esports market that will affect their business model.
Purchasing digital content and digital services from any EU country should be easy within the Single Market. However, when products are faulty, consumers are often uncertain about their rights. Many businesses also hesitate to offer their products to consumers abroad because of differences in national contract laws. To solve these problems, the EU Digital Content Directive was adopted.
The Digital Content Directive will affect many established business practices concerning the provision of video games to consumers and the corresponding advertisement. Indeed, the Digital Content Directive is considered as one of the most impactful regulations for the video games and software industry in the last few years. Below is a short outline of its main contents:
1. The territorial scope and applicability of the Digital Content Directive is broad
Being located abroad will not help to escape the provisions of the Digital Content Directive. Contracts concluded by a consumer with a video game company, or esports organizer are governed by the law of the country where the player has his/her habitual residence, provided that the game company either pursues its commercial or professional activities in that country or by any means directs such activities to that country. In this regard, the typical example to be considered is when offering the service in the local language and/or currency and running advertisements tailored to the market.
The Digital Content Directive also applies to free-to-play games (i.e., where the consumer is not required to pay a purchase price for the game but instead provides or undertakes to provide personal data to the trader.) This circumstance is relevant in particular, where the data provided by a consumer is used for advertising purposes, a business model that is often used for targeting in-game advertisements.
2. The publication of incomplete video game demo versions can lead to challenges
It is a reality that game development is subject to tight deadlines and publishing schedules. Therefore, it has become a common practice to immediately update a demo version of a video game that might provide a different impression on how the final game might look like or function. The Digital Content Directive specifically sets out that
the digital content or digital service has to comply with any trial version or preview of the digital content or digital service, made available before the conclusion of the contract. (Article 8 par. 1 lett. d)
Based on the above-mentioned provision, the Digital Content Directive requires suppliers of digital content or digital services to comply with certain objective requirements for conformity:
- the qualities and performance features: and
- the functionality, compatibility, accessibility, continuity, and security market standards for digital content or digital services
need to be of the same type as those outlined in any trial version or preview of the videogame
In other words, a video game that does not function as the consumer can expect that it does not meet the requirement. In case of non-compliance, consumers can be entitled to:
- have the digital content or digital service brought into conformity;
- to receive a proportionate reduction in the price, or
- to terminate the contract, entitling the consumer to obtain the reimbursement for all sums paid under the contract.
Accordingly, any public statement made by or on behalf of the video games company (e.g., on social media advertisements and or during an eSports tournament) can be considered an objective requirement for conformity that the consumer may reasonably expect that publishers have to deliver.
3. Public communications in press releases and advertisements in eSports competitions can be risky
The Digital Content Directive explicitly yields that where the contract provides for a continuous supply of digital content or digital service over a period of time, the digital content or digital service shall conform to the duration of that period (Recitals 44 and 47 of the Digital Content Directive).
It means that if no public correction is made to a statement, video game companies are bound to their public statements. Thus, advertisements and reasonable expectable product standards still occur and shall be maintained throughout the service game’s lifespan.
The consequences of non-compliance are the same as those outlined in the paragraph above. The important difference is that the consumer can only demand reimbursement for the time period of non-conformity (i.e., since the unpopular update was implemented).
However, while this reduces the risk in terms of reimbursements for publishers and esports organizers, the risk actually lies with the consumer potentially being entitled to have the digital content or digital service brought into conformity. Such a claim would require the game company to remove unpopular modifications again.
Under the Digital Content Directive, general modifications are only allowed (Article 19) if all of the following requirements are met:
- the contract allows and provides a valid reason for the modification;
- the modification is made without additional cost to the consumer;
- the consumer is informed in a clear and comprehensible manner of the modification; and
- where the modification negatively impacts the consumer’s access to or use of the digital content or digital service, the consumer is informed reasonably in advance on a durable medium (e.g., email) of the features and time of the modification and of the right to terminate the contract, or (if applicable) of the possibility to maintain the digital content or digital service without the modification.
The current state of play
The European Parliament and the Council adopted the digital contracts directives on 20 May 2019. Following the directives’ publication in the Official Journal, Member States have two years to transpose them in their national law. This time window means that the new rules will begin to apply throughout the EU at the latest by the end of 2021.
Games companies and esports organizers should be prepared and start early enough to implement compliance structures such as the communication of updates and training of marketing personnel, development teams concerning the new rules on public communication, and harmonize key consumer contract law rules across the EU.