Editor's Insight

"The [social gaming] industry will need to consider whether their current practices in relation to in-app purchases are sustainable" - Stuart Tilly

Social gaming interview with Hilary Stewart-Jones of DLA Piper & Stuart Tilly, Director of the Social Gaming Association

The Social Gaming 2013 conference, held in Central London and organised by World Online Gambling Law Report, takes place on 23 May 2013. In anticipation of some of the issues to be discussed at this event, two of the conference's speakers - Stuart Tilly, Director at the Social Gaming Association, and Hilary Stewart-Jones, Partner at DLA Piper and an Editorial Board member for World Online Gambling Law Report - answered a few questions on hot topics such as social gaming regulation, the Belgian approach to this area, and what effect the OFT's investigation into in-app purchases will have on the social gaming sector.

Why has social gaming caused such a stir in the gambling industry? Do you think social gaming will be a flash in the pan?

Hilary: Because it surprised the industry how many people wanted to pay to play casino type games, without the incentives of winning money or money's worth. The industry has already proven it is not a flash in the pan, although some of the valuation 'hype' is probably unsustainable.

Is regulatory action on social gaming inevitable or is the concept of regulation of social gaming somewhat of a false alarm for industry?

Stuart: I don't believe formal regulatory action is inevitable provided the industry is proactive in addressing the concerns of detractors. However, the concept of regulation is by no means a false alarm. There have already been strong calls for regulation from Sweden and Australia, with Belgium going as far as to add two social casino game companies to their black list of operators they deem to be carrying out illegal gambling. France is considering introducing new measures to address concerns it has about the social impact such games could have on the young and vulnerable and the potential money laundering risk. The UK is also giving the sector a watching brief as it looks to ascertain what social harm, if any, is posed by the sector and if so the appropriate means by which to address such issues. 

What is your opinion of Belgium's ban on social games despite the fact that users do not get anything of value out?

Stuart: I believe the decision by the Belgium Gambling Regulator to place two social gaming companies on its black list to have been a hasty one. It was not based, as far as I am aware, on any formal data or evidence that consumers were at risk by playing on such sites. I would prefer to see regulators taking a more considered, informed and balanced approach to assessing whether playing social casino style games poses a risk to the consumer, as shown by the UK Gambling Commission's approach to the issue.   

Hilary: Belgian law looks at the cost to a player, not just what can be won, so the legal definition supports the initiative to blacklist certain of the social games companies. However, despite this legal definition (i.e. it is if you pay to play a chance game that defines the product as gambling) being replicated in other jurisdictions, it is only Belgium that has taken such a zealous approach to date. 

Can the social gaming industry successfully self-regulate and will this be enough? Beyond this, what other options does industry have? 

Stuart: By the industry collectively recognising that they have a responsibility to promote and abide by principles of responsible gaming it will undoubtedly help embolden the image of the industry in the eyes of legislators, regulators and other policy decision-makers and go a long way in tempering any knee-jerk calls for formal regulation to be introduced, thus ensuring the industry is able to continue to operate in a dynamic, innovative and non-discriminatory environment. The UK Gambling Commission's Chairman, Philip Graf, stated in January, in reference to whether or not the Commission would eventually look to regulate the sector that... "a lot depends on whether those who provide gambling-like social games consider the potential risks to players and implement the necessary responsible gambling consumer protection measures. I would suggest it is in their interests to self-regulate if they want their business model to be sustainable."

Hilary: It is difficult for the industry to entirely self-regulate until age verification is addressed which is one of the key areas of concern by the industry's critics. However, as matters currently stand, it is too costly for the social gaming industry so until there is a cheaper alternative, self-regulation can only really address issues such as enforced 'rest' periods and the like.

Who should be responsible for regulating social gaming?

Stuart: The primary responsibility should fall on the industry to self-regulate. 

Hilary: It depends on the type of game offered and the provider, and the way in which gambling/games offerings are intertwined on the same sites and the use of virtual currency. Currently, consumer protection bodies, gaming regulators or financial service bodies are the obvious choices.

How does the social gaming industry overcome the lack of authenticated users provided by social media platforms - can they ever really know who is playing their games?

Hilary: Only when verification becomes easier and cheaper will this issue be addressed.

Will recent concerns over in-game purchases in free-to-play apps have any impact on the general social gaming sphere, do you think? 

Stuart: It is very likely to. The recently launched OFT investigation will examine whether games are too misleading, commercially aggressive or otherwise unfair with a view to determining whether game developers are guilty of trade practices that are potentially unlawful. With such increased scrutiny, combined with the real and present threat of enforcement action, the industry will need to consider whether their current practices in relation to in-app purchases are sustainable.

Hilary: It may increase the spectre of regulation depending upon proportionality of the cost, the advantage to be gained and its appeal in terms of the demographic.

Is it the grey area between social games and the conversion of those players into real-money gamblers that is the concern here? 

Stuart: The principal concern raised in relation to casino style social games is that such games pose a risk to the young and vulnerable in society being lured by the glitz and glamour into a pastime they might not have otherwise been exposed to. There is, some claim, an inherent risk posed by trivialising gambling within a playful environment, of the young and vulnerable in society falling victim to some form of gambling addiction. 

Other arguments targeting the sector more generally focus on traditional consumer protection principles, such as the need for greater transparency in how the games operate or how consumers can make a complaint, the need for more robust measures to guard against fraud or data theft, etc.

Hilary: It is only part of the problem. Grooming is an issue but addiction to play, the sums spent globally by minors and the trading of virtual currency all raise concerns too.

Is the move to real-money the way the social gaming industry will head now, do you think? Do the two industries make for good bedfellows?

Hilary: Many have made the move already but this is not necessarily because the underlying demographics of the two markets are the same, but given the importance of technology and entertainment content to both there are clear synergies; the pay to play entertainment industry is now available across multiple devices which has made gambling companies think differently about the type of content that will appeal. However, social gamers are also fickle and easily bored and therefore companies that have both offerings will be the likely successes in the long term. 

For more information about Social Gaming 2013, please contact Geraldine Hervel at Geraldine.hervel@e-comlaw.com.