Level Up Or Level Out: EU And US Regulators Step Up Enforcement Activity Against Video Game Platforms And Their Impacts On Children

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On May 14, 2024, the Netherlands Authority for Consumers and Markets (the "ACM") revealed that they were fining Epic Games 1,125,000 Euros for violating "professional diligence," following ACM's 2023...
United States Consumer Protection
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What You Need to Know

Key takeaway#1

European and US regulators continue to crack down marketing methods directed at children in games and online that the regulators find unfair and deceptive.

Key takeaway#2

Consumer products marketed at children should go through multiple internal reviews to confirm the product is conforming with frequently updated European and US regulations.

On May 14, 2024, the Netherlands Authority for Consumers and Markets (the "ACM") revealed that they were fining Epic Games 1,125,000 Euros for violating "professional diligence," following ACM's 2023 finding that the developer of Fortnite created an environment that pressured children into make purchases in its video game. In issuing the fine, the Decision declared that "ACM is making it known that unfair treatment of children in the digital world is particularly grave and will be dealt with severely."

Specifically, the ACM investigated Epic Games' implementation of the Fortnite marketplace on all gaming platforms, and found that the item shop was using ads to induce children into making purchases by using misleading countdown timers on particular purchases. The ACM found that these practices "damaged the trust and interests of children" and that "Epic offered them various products in a misleading and aggressive manner." These actions violated Section 8.8 of the Netherlands' Act of Enforcement on Consumer Protection by targeting a vulnerable consumer group with misleading commercial practices.

In the published decision, the ACM explained that "children should not be forced to make a decision within 24 hours regarding the multitude of items that are offered in the Item Shop. With a longer availability period for items, children can still perceive pressure to make purchases, but it will be likelier that children will not have to make a decision regarding the supply in a single game moment (and as such, almost immediately)."

In addition to the fine, the ACM is requiring Epic Games to change the Fortnite item shop. A suggested change from the ACM is an "extended timeframe" to purchase, which they say "offers children the opportunity to think about and discuss with their parents any purchase decisions regarding items. . . . In order to make this expanded time period effective, it must be presented in a manner that is as clear as possible for children, and in a way that exerts as little pressure as possible." ACM has given Epic until June 10, 2024 to change its current practices.

This is not the first time Epic Games has been fined for unfair practices towards children. Two years ago, in December 2022, the U.S. Federal Trade Commission ("FTC") and the U.S. Department of Justice jointly announced that Epic Games had to pay two record fines, in twin settlements, totaling half a billion dollars: $275 million in civil penalties for violating the Children's Online Privacy Protection Act ("COPPA"), in the largest fine ever imposed under COPPA, and $245 million in refunds to consumers who made unintended purchases, in the largest administrative order in FTC history.

FTC's announcement signaled a more muscular role in policing the online children's game and social media industry. Indeed, a new bill proposal, The Kids Off Social Media Act, goes a step further in that direction. Proposed in April 2023and the subject of May 2024 Senate committee meetings, it aims to complement COPPA with additional protections for social media on top of their protections for kids online due to the outsized negative impacts that social media is having on children and teens. The bill would require that social media platforms verify the age of their users, prohibit the use of algorithmic recommendation systems on individuals under age 18, require parental or guardian consent for social media users under age 18, and prohibit users who are under age 13 from accessing social media platforms. The bill is only at the early stages of the legislative process and still needs to be passed in Congress.

The online protection of children continues to be at the top of the EU agenda as well. The European Commission announced on May 16, 2024 a formal investigation into Meta, saying it may have breached the Digital Services Act over the protection of minors on Facebook and Instagram. The Commission is concerned that the company's algorithms may lead to addiction in children, and create so-called "rabbit-hole effects." It also plans to investigate the sites' age-assurance and verification methods. "With the Digital Services Act we established rules that can protect minors when they interact online," said Margrethe Vestager, European Commissioner for Competition. Breton, the Commissioner for Internal Market added, "we are sparing no effort to protect our children."

As European and US regulators continue to crack down on marketing methods directed at children in games and online that the regulators find unfair and deceptive, consumer products marketed online to children should go through multiple internal reviews to confirm the product is conforming with frequently updated European and US regulations.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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