When a draft of the European Commission’s Digital Fairness Act leaked earlier this week, some industry reactions had a distinctly end-of-days flavour. The official responses now winding their way out of trade bodies after the official draft of the act was released are only ratcheting down the tone a little; less apocalyptic, but nonetheless grim warnings of a terrible fate for European games companies, muttering darkly about the stripping of supposed freedoms from players, parents, and everyone else within a very wide radius.
We’ve all known that the European Union has been gearing up to regulate in-game monetisation for around a decade at this point, so I don’t know that “shock” is the right term for the reaction – but I do understand that there’s a hare-and-tortoise element to national and supranational regulation that often catches high-tech industries, like gaming, off-guard.
While high-tech companies move fast and break things, they often lose sight of the regulators many, many steps behind, slowly and methodically totting up an account of all those broken things. Once regulations finally arrive, the business practices they limit seem baked-in and well-established to the fast-moving companies, who spit feathers at the notion that they can’t do them anymore. Smartphones, app stores, and in-app purchases seem like old news to the games industry, making it easy to miss how very new and novel they are when viewed on a legislative and regulatory timescale.
Dr Andreas Lober has already done an excellent job on this site of walking through what the formal draft of the act actually contains, article by article. I won’t retread that ground. I will say that I understand – not sympathise with, perhaps, but certainly understand – why the wide-reaching restrictions in the proposed legislation feel like the sky is falling for a certain kind of games executive. If your earnings calls have been powered for years by mechanisms like loot boxes, virtual currencies, and engagement patterns designed to tickle people’s FOMO instincts, this draft must read like a list of your business’s load-bearing walls being marked for demolition.
What actually ends up being enacted after the draft legislation has been debated and amended remains to be seen, but as an opening salvo, this is an aggressive one – essentially a maximal set of regulatory demands. If nothing else, it implies a significant rift between the Commission and the industry it is regulating here – which raises two pertinent broader questions. How on earth did we end up here, with the industry so utterly at loggerheads with the world’s most powerful regulatory body, and where does it all go next?
The first question, at least, has a fairly simple answer. This is a tragedy of the commons: one that’s been playing out in slow motion for well over a decade.
It was inevitable that the issue would eventually be taken up at a European level
Regulators across Europe have been very vocally uncomfortable with the monetisation mechanisms creeping into games since at least the early 2010s – especially those aimed at, or simply accessible to, children. Once national legislators and regulators started picking off the most egregious practices piecemeal – Belgium’s gaming commission declaring paid loot boxes to be illegal gambling in 2018 being the most famous example, but far from the only one – it was inevitable that the issue would eventually be taken up at a European level. A patchwork of national rules across a single market is precisely the kind of problem the EU exists to solve, and by 2023 the European Parliament was calling for a harmonised approach to loot boxes.
As this process rolled slowly forwards, there were plenty of warnings about where this would lead – many of them from developers and publishers with skin in the game. The message was consistent: if this ends up being decided in Brussels, the rules that come down will be stricter than anyone in the industry wants. EU regulation is powerful, and from a consumer’s perspective, it’s frequently welcome (one sobering reality check for anyone hoping that this act will be watered down significantly is to look at comments about it from consumers online, and see where the balance of opinion among ordinary citizens lies). It’s also, much of the time, a blunt instrument. A framework that has to function across 27 member states, and which in the case of the Digital Fairness Act also has to cover subscription traps, influencer marketing, customer service, and the interface design of practically every consumer-facing website and app, is going to sacrifice nuance in a lot of places along the way.
This is one of the major problems facing the lobbying efforts that will now attempt to dial down some of the strictest parts of the act: games are one stakeholder among many, and may not be one with a great deal of goodwill in the bank.
Why not? In part, because regulators tend to view the games business as being something of an offshoot of the tech business, and the EU has made clear how little time it has for tech giants and their machinations in recent years. It’s also, however, undeniable that there was a time when a genuine effort at industry self-regulation might plausibly have headed off the sharper end of the EU’s interest. What we got instead was lip-service so transparent it was practically see-through. Drop-rate disclosures arrived grudgingly, often tucked away where few players would ever see them (I especially like the games that show every other piece of information in the in-game UI, but cannot show drop-rate details without opening a barely useable browser window on your PS5). An “in-game purchases” notice got added to age-rating labels. Industry representatives sat in front of parliamentary committees and described loot boxes as “surprise mechanics” with a straight face. None of it was ever going to persuade a sceptical regulator that the industry was taking the problem seriously, because it so obviously wasn’t.
Maybe that lack of sincere engagement made a difference – it certainly didn’t help – but what makes this a genuine tragedy of the commons, rather than simply a story of corporate cynicism, is that there probably wasn’t actually a better way forward on offer. Even if industry bodies and their members had taken a really firm line, it would not have been enough. As grimly exploitative as the monetisation practices of some major publishers have been, the truly darkest of dark patterns are often found in mobile titles whose creators have never been within shouting distance of any kind of industry body, and never will be. Every effort to rein in the practices of the major publishers would merely have created a market gap for less scrupulous companies to fill – and before long, FOMO would have the majors right back in that market anyway. No individual company could afford to walk away from that revenue alone, and nobody had the authority to make them all walk away together. That’s the commons, and it got grazed down to bare earth.
So here we are instead, with blunt rules about to be handed down by regulators who stand accused, often loudly, of simply not understanding the games market. That’s probably true, to a fairly significant extent. It’s also not a very good or productive argument. It misunderstands what regulators actually do, and on whose behalf they regulate. Regulators don’t need to understand games in order to see the negative impacts of their business practices, any more than a doctor needs to understand automotive engineering to treat a patient who’s been hit by a car.
Regulators stand accused of simply not understanding the games market. That’s probably true, to a fairly significant extent. It’s also not a very good or productive argument
Too often, when you dig into the “they don’t understand our business” argument, what it actually boils down to is “don’t you understand that if you regulate this, we won’t be able to make money?” No doubt that’s a pressing concern for the companies involved – some of whom really have turned these practices into load-bearing walls in the years that it’s taken for regulatory processes to catch up. It’s of almost no concern whatsoever to regulators, however, as their job is to protect consumers from unfair or misleading business practices, not to safeguard anyone’s profits.
What happens next, then? The draft now heads into the EU’s legislative machinery, where Parliament and Council will both have their say and an army of lobbyists will be working the details. There’s plenty of room for the text to change; as Dr Lober points out, many of its key definitions are currently quite vague, and some of its choices – like leaning on age ratings to judge whether a product is “directed at minors”, which practically invites publishers to chase an 18+ rating – look like the kind of thing that will either get tightened up or get exploited.
What the lobbying is unlikely to change is the fundamental shape of this thing. Even taking the narrowest possible reading of its terms, the act would still essentially eliminate a wide set of monetisation strategies used in games across all platforms – especially on mobile, and especially where underage players are concerned. Anyone banking on the European Parliament to soften the blow should remember that it has historically been the more consumer-protective of the EU’s institutions.
Nor will the effects of the act stay in Europe. Games that rely on these systems will face a choice: you either build an entirely separate version for the EU, or give up on that huge market entirely. Some will try the former, at least at first. Over time, though, I suspect a lot of these strategies will simply become less appealing everywhere. Partly that’s a straightforward cost calculation – maintaining a separate EU build with a separate economy is expensive, and once you’ve done the work of designing a version of your game that functions without these mechanics, the case for keeping them everywhere else gets weaker. We’ve seen this story play out before; the EU never set out to legislate the whole world’s phone charging ports, but that’s effectively what happened with USB-C.
Once you’ve done the work of designing a version of your game that functions without these mechanics, the case for keeping them everywhere else gets weaker
Partly, though, it’ll be about perception. Once players outside Europe become aware that EU players are getting a “better” version of the game – one with honest real-money pricing, no loot boxes for kids, and the ability to switch off the nagging notifications and streak mechanics – that awareness will filter out and turn consumer opinion against these systems elsewhere too. “The version that’s legally too exploitative to sell in Europe” is not a great marketing position for anyone to try to defend.
The other argument being widely aired, which will doubtless get even louder as the bill progresses, is that this will put European developers at a disadvantage on the global market, hobbled by rules their American and Asian competitors don’t have to follow. This is the main thrust of statements from industry bodies thus far, but I’m not especially convinced by it. Anyone selling into the EU will be bound by exactly the same rules, while European developers selling outside it will be under no obligation to strip these mechanics from their non-EU versions.
Even if I were more convinced by the argument, though, I find it hard to believe that the Commission will care much for it. I’d be willing to bet they have figures to hand on how much of the revenue generated by these dark pattern monetisation practices in Europe actually stays in Europe – and I strongly suspect the answer is “very little”, with the overwhelming majority flowing straight out to overseas multinationals. Protecting European consumers from practices that mostly enrich companies outside Europe is not a hard sell in Brussels right now.
A bill is finally coming due – one the industry ran up over more than a decade
None of which is to say that the Digital Fairness Act is a good piece of legislation – it’s far too vague and broad in many ways, and could end up putting a lot of entirely innocent practices into legal grey areas in its current form. It’s not even to say that it will help consumers in all the ways it intends to; that remains to be seen. But the sky isn’t falling. What’s actually happening is that a bill is finally coming due – one the industry ran up over more than a decade while being told, repeatedly and by people on its own side, exactly what would happen if it didn’t take responsibility for itself. It didn’t; perhaps it simply couldn’t. Now someone else is going to do it instead, with far less care for nuance – and sympathy for the companies impacted will, I suspect, be in precious short supply, most of all from their own customers.