MSU Professor Backs California in Upcoming Videogame Law Fight

May 28, 2010 -

In what can only be categorized as "no great shock to our readership," Michigan State University law professor Kevin Saunders will help the state of California when the Supreme Court revisits Schwarzenegger v. Entertainment Merchants Association later this year. Saunders will help co-author an amicus brief to help California’s position when arguing its case before the U.S. Supreme Court during its 2010-11 session, which begins in October. As you probably already know, Saunders testified during the 2005 California State Assembly Judiciary Committee hearings on the issue at the invitation of Leland Yee. His arguments were obviously against the industry and for the law written by Yee.

Saunders' statements on the matter almost sound like the ECA's, EMA’s or the ESA's position:

"Parents need to play an active role in deciding what is appropriate for their children."

No disagreement there. But then he makes it sound as if the law helps to insure that universal truth:

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Pending Legislation Could Boost FTC Net Power

April 30, 2010 -

As the Federal Communications Commission (FCC) continues to lick its wounds following a recent court loss to Comcast, a provision could emerge from financial overhaul legislation that would boost the Federal Trade Commission’s (FTC) governing ability over the Internet.

The Washington Post reports that a current version of regulatory overhaul legislation passed by the House would, “allow the FTC to issue rules on a fast track and permit the agency to impose civil penalties on companies that hurt consumers.”

The Post notes that, while such a provision is absent from current legislation before the Senate, “some observers expect the measure to be included when the House and Senate versions are combined.”

Why some groups believe the FTC's power should be expanded:

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FTC Mulls Changes to Child Online Protection Act

March 24, 2010 -

In order to keep its Children’s Online Privacy Protection Act (COPPA) in line with advances in technology, the Federal Trade Commission (FTC) is seeking comments from the public on whether updates to the law are necessary or not.

COPPA focuses on how website operators or online services deal with the personal information of kids younger than 13. Currently, it requires that third-parties must notify and receive permission from parents before “collecting, using, or disclosing” such info. Additionally, it requires that the information be kept secure and limits operators from collecting “any more personal information than is reasonably necessary.”

One specific area that the FTC is seeking public comment on is:

What implications for COPPA enforcement are raised by mobile communications, interactive television, interactive gaming, or other similar interactive media.

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FTC Complaints: Where do Games Rank?

February 24, 2010 -

The Federal Trade Commission (FTC) has released a list (PDF) of the top complaints that consumers filed with the agency for the 2009 calendar year.

The category of videogames came in at number 30 on the list, totaling 1,185 complaints during the year, or .00089 percent of all complaints filed during the year (1,330,426). Videogame-related complaints were related to “problems with videogame companies, defective products, billing or collection, contracts, customer service, delivery, guarantees or warrantees, repairs and service.”

Complaints in the category have, however, risen over the years, from 694 in 2007 to 1,073 in 2008.

This year’s top complaint was about identify theft, which made up a whopping 21.0 percent of all complaints with 278,078 consumer inquires on the subject.

The FTC has also released an animated video to show consumers how to file a complaint.

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FTC: Virtual Worlds Offer Real Explicit Content to Minors

December 10, 2009 -

A congressionally-mandated Federal Trade Commission (FTC) report looks into the availability of sexually and violently explicit content in online worlds to minors.

Virtual Worlds and Kids: Mapping the Risks examined 27 virtual online worlds, including Second Life, Build A Bearville, IMVU, Neopets, Runescape, There and YoVille. Selected worlds investigated ran the gamut from those intended for kids to those aimed at adults only.

At least one instance of sexually or violently explicit content was found in 19 of the 27 virtual worlds, with five labeled as having a “heavy” amount of explicit content, four containing a “moderate” amount, while a “low” amount was found in 10 virtual worlds.

Kid-oriented (designed for children ages 13 and under) virtual worlds fared a little better, with seven featuring no explicit content, six featuring a “low” amount and a single world labeled as having “moderate” explicit content.

The report also examined the ways in which virtual worlds designed for older teens or adults kept out younger children. It was found that “most” worlds used an age-screening mechanism tied to a birth date entered in the registration process and half of these worlds did not accept kids who re-registered on the same computer using a modified birth date.

The Commission recommended five steps for virtual world operators to take in order to limit the exposure of kids to explicit content:

  • Ensuring that the age-screening mechanisms virtual world operators employ do not encourage underage registration;

  • Implementing or strengthening age-segregation techniques to help ensure that minors and adults interact only with their peers and view only age-appropriate material;

  • Re-examining the strength of language filters to ensure that such filters detect and eliminate communications that violate online virtual worlds’ conduct standards;

  • Providing greater guidance to community enforcers in online virtual worlds so that they are better equipped to: self-police virtual worlds by reviewing and rating online content; report the presence of potential underage users; and comment on users who otherwise appear to be violating a world’s terms of behavior; and,

  • Employing a staff of specially trained moderators whose presence is well known in-world and who are equipped to take swift action against conduct violations.


What defines explicit? The Commission developed its own factors, looking to Motion Picture Association of America (MPAA) Entertainment Software Ratings Board (ESRB) rating criteria.

The full report, in PDF form, can be grabbed here.

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Game Industry Scores Well in FTC Report

December 3, 2009 -

The Federal Trade Commission’s (FTC) seventh report on Marketing Violent Entertainment to Children (PDF) contains good news for the videogame industry.

The FTC review labeled the games industry the "strongest” of the three entertainment sectors (games, music and movies), when it came to self-regulation. The Commission added that the game industry “did not specifically target M-rated games to teens or T-rated games to younger children.“ Additionally, compliance with the Entertainment Software Rating Board (ESRB) code within the videogame industry was “high in all media.”

Undercover shopping stings run by the FTC reported that retailers were “strongly enforcing” age restrictions for M-rated games, with “an average denial rate of 80%.” GameStop and Target were labeled as top enforcers. Toys R Us however, was specifically labeled as trailing when it came to enforcement, with only a 56% denial rate. The report called the use of gift cards to buy games online a “potential gap in enforcement.”

On the advertising side, the FTC found that game companies demonstrated a “high degree of compliance” when it came to television ads, with only a “few instances” of non compliance over a more than two-year period. The same description was used to depict compliance with videogame print ads.

FTC suggestions aimed directly at the game industry were adding content descriptors to the front of videogames, alongside ratings, and to continue to provide more detailed rating summaries online for parents. Additionally, all three industries were told to pay more attention to compliance within online and viral marketing campaigns.

Entertainment Software Association (ESA) President and CEO Michael D. Gallagher was understandably happy about the report, saying, "Today's FTC report is a strong acknowledgement and validation that industry-led self-regulation efforts are the best way to provide parents and retailers with the resources and support they need to keep our kids' entertainment experiences suitable."

The ESA press release also included a quote from National Institute on Media and the Family (NIMF) head, Dr. David Walsh, who stated, “We join the FTC in applauding the industry's progress. The advancement in technology including parental controls by console makers, identification checking by retailers, and an ongoing effort to improve ratings illustrates that the members of the video game industry have taken our concerns seriously and continue to make sure that kids enjoy games that are age appropriate."

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FTC: Freebies Must Be Disclosed

October 5, 2009 -

The Federal Trade Commission passed down a ruling today that could have some impact on the way video game reviews sites and bloggers do business.

The FTC, in a 4-0 ruling, said that "material connections" between advertisers and endorsers (such as payments or free products) "must be disclosed."

The hook seems to be the phrasing that "connections that consumers would not expect." Hardcore video game readers tend to be a jaded lot, and think that many sites are on the take for good reviews any way, whether they are or not. Most understand that sites get free games to review. But the general consumer may not know this.

The ruling also broadened the existing guidelines to cover bloggers:

[The new rules] address what constitutes an endorsement when the message is conveyed by bloggers or other “word-of-mouth” marketers. The revised Guides specify that while decisions will be reached on a case-by-case basis, the post of a blogger who receives cash or in-kind payment to review a product is considered an endorsement. Thus, bloggers who make an endorsement must disclose the material connections they share with the seller of the product or service.

The FTC did not rule that bloggers or companies must disclose any conflicts of interest.

There has always been a blurred line when sites accept advertising from game publishers and then review their products. Those same sites get free games and swag as part of review packages from publishers. Some sites do disclose this information, but most don't.

GamePolitics has contacted the FTC to see if these new rules extend to the video game arena. We'll update with a response when we get it.

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At Shareholders Meeting, Target Gets Targeted by PTC Over Violent Games

May 29, 2009 -

Watchdog group the Parents Television Council lashed out at Target this week during the retailer's annual shareholder meeting in Waukesha, Wisconsin.

According to a PTC press release, Bob Sherman, director of the organization's Chicago grassroots chapter, called out Target executives over a 2008 secret shopper sting. In that operation the PTC says that minors were able to purchase M-rated games 41% of the time at Target stores. Sherman told the execs and assembled shareholders:

On average our volunteers, all between the ages of 11 and 16, were able to purchase video games rated ‘M’ by the ESRB for mature content 36% of the time.  Target stores fared worse than the average – underage children were able to purchase M-rated video games at Target stores a stunning 41% of the time.  Parents have the right to expect that age restrictions for adult entertainment products will be enforced at the retail level...

Target represents families to so many consumers.  Your advertising and community good works reflect how Target is embedded in our lives.  The Parents Television Council is eager and ready to work with you to address this industry-wide dilemma.

Sherman and the PTC also slammed Target for selling mature-themed DVDs to underage buyers.

In contrast to the PTC's numbers, the most recent secret shopper survey conducted by the Federal Trade Commission found that underage buyers of M-rated games were successful only 29% of the time at Target.

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Congress Awaits FTC Report on Explicit Content in Virtual Worlds

May 11, 2009 -

At the behest of Congress, the Federal Trade Commission is looking into children's access to explicit content in virtual worlds.

That word comes by way of Virtual Worlds News which spoke to a pair of FTC attorneys last week. The regulatory agency's report on its findings is scheduled to be presented to Congress in December.

GamePolitics readers may recall that in 2008 Rep. Mark Kirk (R-IL) called on  the FTC to issue a parental alert about the virtual sex occurring in Second Life:

Sites like Second Life offer no protections to keep kids from virtual "rape rooms," brothels, and drug stores. If sites like Second Life won't protect kids from obviously inappropriate content, the Congress will.

VWN notes that Second Life publisher Linden Lab recently announced a plan to restrict underage SL users from accessing mature content.

Via: Massively

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Mobile Games Biz Blew Opportunity to Lobby FTC

April 24, 2009 -

Mobile game makers missed a chance to get their issues on the Federal Trade Commission's radar, according to a telecommunications lawyer who tracks game issues.

Writing for Gamasutra, Steve Augustino (left) notes that a just-issued FTC report, Beyond Voice: Mapping the Mobile Marketplace, devotes but a single paragraph - out of 54 pages - to mobile gaming. The report is the result of a two day FTC town hall conference held in May, 2008.

From Augustino's article:

There is no discussion of app stores, of the impact of the carrier deck, of other handsets as gaming platforms... of innovative games taking advantage of location capabilities of phones, or any other significant development in the mobile gaming marketplace.

There also was no discussion of the PSP, DS or DSi and the implications that wi-fi and VoIP create... It’s too bad, for this would have been a good opportunity to paint a fuller picture of the games industry and also could have been a vehicle for addressing impediments to the further growth of the platform.

Augustino doesn't blame government bureaucrats for the oversight. Instead, he faults the mobile game industry for failing to take the initiative. He told GamePolitics:

I do not fault the FTC. They organized this conference based on the entities that they knew about or that expressed an interest in participating.  My point is that the games industry is being silent and that the silence could harm them.  Too much of what the industry does is defensive... The industry cannot win if it always plays defense. 

 

I think the FTC "Mapping the Mobile Marketplace" is an example of a missed opportunity for the industry to discuss its successes and to present a different image to the policy makers.

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Report: GameStop Loans Games to Employees, Sells Them as New

April 10, 2009 -

Kotaku reports that a GameStop corporate policy of selling games played by store employees as brand-new may be a violation of federal law:

GameStop's "check-out" policy, confirmed to Kotaku by a number of the chain's managers and employees, could fall under scrutiny of the Federal Trade Commission.

Kotaku cites GameStop's policy, which it reports that it obtained from several employees of the leading video game retailer:

Associates are allowed to check out one item of store merchandise for personal use for up to four days. Merchandise checkout is a privilege, not a right, and may be revoked at any time...

If the product is returned in unsellable condition, or if anything is missing from the package, or if the product is not returned, the Associate must purchase the product...

When asked by Kotaku, the Federal Trade Commission declined to say whether GameStop's practice of selling employee-played games as new might be considered deceptive. The FTC also declined to say whether it was looking into the practice.

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Hal Halpin, ECA on Hand For Today's FTC Town Hall Meeting on DRM in Seattle

March 25, 2009 -

The Federal Trade Commission's much-anticipated Town Hall Meeting on digital rights management (DRM) will take place today at the University of Washington Law School in Seattle.

The all-day event begins at 8:30 A.M. Pacific and will be webcast live.

Among other participants, Entertainment Consumers Association President Hal Halpin will serve on the 1:15 P.M. panel "Informing Consumers." According to the FTC's agenda, "This panel will discuss how companies communicate the existence and effects of DRM protections on products and services to consumers. It will explore ways of providing consumers with better notice."

In advance of his panel appearance, Halpin issued a statement on the Town Hall Meeting:

Over the past year we have witnessed a growing concern from gamers about the issues of increasingly invasive Digital Rights Management (DRM) and End User Licensing Agreements (EULAs). While we respect the careful balance that must exist between the content community and the customer, and agree that piracy is an ever-present challenge for the trade, it is also becoming evident that consumer rights are being diminished in the process...

The law, in the area of EULAs in particular, is not as clear as it once was. And the software industry’s potential side-stepping of the First Sale Doctrine’s protections – by terming their products as “licensed” rather than “sold” - leaves us concerned about the future of interactive entertainment, generally...

Halpin also noted that the ECA is preparing new position statements on both DRM and EULAs. You can read the full text of his statement here.

Among others known to be appearing at the Town Hall on behalf of consumers is Staff Attorney Corynne McSherry of the Electronic Frontier Foundation.

FULL DISCLOSURE DEPT: The ECA is the parent company of GamePolitics.

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FTC Issues Consumer Alert on Kids' Exposure to Virtual Worlds

March 2, 2009 -

The Federal Trade Commission has issued a consumer alert designed to warn parents about the risks their children may face while gaming online.

The alert, Virtual Worlds and Kids: Mapping the Risks, contains the following advice:

According to the [FTC] many virtual worlds say they’re for adults only and try to verify that visitors are over 18 before they can enter. But a posted age requirement may not stop kids — especially curious teens — from finding their way in, either accidentally or otherwise...

If your child gets really interested in online gaming or virtual worlds, watch for changes in their patterns of behavior that could indicate an unhealthy obsession. Nobody knows your child better than you do, so you’re best placed to know what sites may be appropriate for your child.

For more online safety information, the FTC refers parents to OnGuardOnline.gov.

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Electronic Frontier Foundation Calls on FTC to Protect Consumers From DRM

February 13, 2009 -

Digital activist group the Electronic Frontier Foundation has called upon the Federal Trade Commission to mitigate the harm caused to consumers by digital rights management (DRM).

An EFF press release quotes staff attorney Corynne McSherry (left) on the DRM issue:

DRM does not prevent piracy.

 

At this point, DRM seems intended to accomplish a very different purpose: giving some industry leaders unprecedented power to influence the pace and nature of innovation and upsetting the traditional balance between the interests of copyright owners and the interests of the public.

 

The best way to fix the problem is to get rid of DRM on consumer products and reform the [Digital Millenium Copyright Act], but the steps we're suggesting will help protect technology users and future technology innovation in the meantime.

The EFF press release adds:

Industry leaders argue that DRM is necessary to protect sales of digital media, but DRM systems are consistently and routinely broken almost immediately upon their introduction.

The group filed public comments with the FTC in advance of the government agency's Town Hall on DRM, which is scheduled for March 25th in Seattle.

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Could Federal Trade Commission Tackle the EULA?

January 31, 2009 -

Do you pay attention to the fine print when you install a game or other software on your PC?

Me neither.

But in many cases, End User License Agreements (EULAs) stack the deck against consumers.

In his Law of the Game on Joystiq column, attorney Mark Methenitis speculates that the Federal Trade Commission may decide to weigh in on the EULA debate in order to protect the interests of game buyers.

In Methenitis's view, the FTC has three possible courses of action:

  • requiring that EULAs be written in plain language, not indecipherable legalese
  • mandating that EULAs be dropped entirely in favor a consumer information checklist devised by the FTC
  • a hybrid of these two

Mark sees potential revenue opportunities for the FTC in EULA regulation as well (hit the jump for the update).

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Do Consumers Need Govt. Protection From DRM? It's on the Agenda at FTC Conference

January 6, 2009 -

Last September's controversial release of Spore demonstrated the extent to which digital rights management (DRM) has become a wedge issue between game publishers and game consumers.

Might the government step in on the side of consumers?

That's difficult to say, but we note that the Federal Trade Commission will hold a town hall conference on DRM issues in Seattle on March 25th. The event will be co-hosted by the Technology Law and Public Policy Clinic at the University of Washington School of Law.

The FTC is currently recruiting panelists and hasn't yet finalized topics. Here's the preliminary agenda:

  • Opening remarks
  • Demonstrations of DRM-related technology
  • Panel discussions regarding burdens on, and benefits for, consumers, and other market and legal issues involving DRM
  • Review of industry best practices
  • Consideration of the need for government involvement to better protect consumers.

That last bullet point is pretty interesting, especially in light of the FTC's mission:

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them.

Game consumers have been complaining loudly about DRM and lately even filing class-action lawsuits over the issue. Publishers who employ DRM routinely cite game software piracy as the reason.

Those interested in serving as panelists or suggesting topics for discussion should contact the FTC at drmtownhall@ftc.gov by January 30, 2009. An FTC press release offers these guidelines:

Interested parties should include both a statement detailing their expertise on the issues to be addressed at the Town Hall, and complete contact information. The Commission will select panelists based on their expertise and on the need to represent a range of views.

Those with a view may also submit written comments or original research until January 30, 2009 to this URL. The town hall meeting is free and open to the public. Pre-registration is not required. It will be webcast live on the FTC website.

Thanks to: GP reader Steve Augustino

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NIMF Report Card Praises Game Biz, Gives Parents an Incomplete

November 25, 2008 -

Mom and Dad forgot to turn an assignment in, apparently.

While lavishly praising the video game industry in its 13th Annual Video Game Report Card, the National Institute on Media and the Family has tagged parents with an "incomplete."

Actually, the "I" grade is NIMF's cutesy way of saying, well, not much, to be honest. Here are the grades along with NIMF's commentary:

ESRB Ratings.... A The addition of ratings summaries is yet another step forward in the growing list of improvements that the ESRB has made in recent years.

ESRB Ratings Education.... We commend the ESRB for intensifying efforts to help parents understand the video game ratings. The ESRB has become the entertainment industry leader in educating retailers and parents about the rating system.

Retailer Ratings Enforcement.... B+  The 80 percent enforcement rate shows significant progress with still some room for improvement.

Gaming Console Manufacturers.... Parental controls, timing devices and parent education efforts are all major
improvements giving parents more tools to supervise game play.

Parental Involvement.... Incomplete  The focus of this year’s report card is providing parents with the information they need. All segments of the industry have made significant improvements in recent years. Parents now have more information and tools than ever before. However, the constant changes present new challenges. Parents need to pay more attention to the amount of time and the types of games their kids play. The parent guide section in this report card is intended to motivate and equip parents to do this.

GP: We can't argue with the grades assigned to the game industry categories by NIMF, and the industry must certainly be pleased. There was a time, and not so long ago, that the ESA and ESRB dreaded this day as NIMF head David Walsh and Sen. Joe Lieberman would step to a Capitol Hill podium and deliver their annual video game beatdown, er, report card.

As to the incomplete for parents, it's meaningless, since NIMF has no way to measure it.

We must also say that the process would be far more coherent if NIMF maintained the same grading categories from year to year. The 2007 version, for example (which was far less complementary to the industry), included grades for "Retailer Policies," (broken down by National, Specialty and Rental) and "The Gaming Industry."

The 2005 version absolutely savaged the industry and included grades for "Ratings Accuracy," "Arcade Survey," and "Industry's 10-year cumulative grade." 

In addition to the grades, the report card contains about 30 pages of material regarding topics such as game addiction and a section on aggression research by Prof. Douglas Gentile of Iowa State University.

Finally, NIMF's unfortunate decision to accept game industry funding clouds their grading effort. Inevitably, there are those who will say that the one-time watchdog has become a lapdog.

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$28 Million NFLPA Verdict Reveals Details of EA's Madden Monopoly

November 17, 2008 -

Here at GamePolitics I've been complaining (some might say whiningsince 2005 that EA's exclusive arrangement with the NFL is, at best, a bad deal for gamers.

At worst, it's a monopoly.

Ultimately, the Federal Trade Commission, looked at the Madden issue in relation to EA's merger dance with Take-Two Interactive. But, inasmuch as the FTC pre-approved the EA-T2 deal, its regulators apparently came down against the monopoly view.

But that was before secret e-mails from officials of the NFL Players Association were made public in September during a bitter court fight between retired players and the NFLPA. As GamePolitics reported last week, the retirees were ultimately awarded $28 million by a U.S. District Court jury in San Francisco. Three-quarters of that amount was levied as punitive damages. The NFLPA says that it will appeal.

While millions in Madden licensing fees were central to the case, EA itself was not a defendant. Despite that, incriminating e-mails clearly show that EA knew it was "scrambling" the likenesses of retired players on Madden's classic NFL teams. More relevant to the monopoly issue, however, is an e-mail which demonstrates that the NFLPA was complicit in helping EA maintain its status as the sole publisher of a pro football game. A February, 2007 e-mail from NFLPA executive Clay Walker to an NFLPA attorney makes this quite plain:

I was able to forge this deal with the [Pro Football Hall of Fame] that provides them with 400K per year (which is significantly below market rate) in exchange for the HOF player rights. EA owes me a huge favor because of that threat was enough to persuade Take Two to back off its plans, leaving EA as the only professional football videogame manufacturer out there.

 

...The per player price for most of these guys was tens of thousands of dollars less than what they were guaranteed by Take Two Interactive so it’s a real coup that we were able to pull this off so cheaply. You have to remember that EA’s total cost is only $200,000 per year. We know that Take Two offered six figure deals to several former NFL players so the total cost is millions below market prices...

Will the revelation that the NFLPA was actively assisting EA by keeping Take-Two on the sidelines raise any red flags at the Federal Trade Commission? Will FTC regulators revisit the Madden issue?

That remains to be seen. If you're asking yourself, "why is this issue important to gamers?" There are several very good reasons; all revolve around the concept of competition:

  • When Take-Two published the NFL2K series, EA had competition.
  • Competition forces companies to put out a better product.
  • Some gamers even preferred NFL2K to Madden.
  • Without an NFL license, Take-Two could not compete with Madden and gave up on pro football.
  • After EA's exclusive deal killed NFL2K, EA's raised the price of its next version of Madden by $20.
  • The price has remained at a higher rate ever since.

Finally, we should point out that a class-action lawsuit, Pecover vs. Electronic Arts, is currently working its way through U.S. District Court in California. Pecover essentially argues that game consumers were screwed by EA's Madden monopoly.

Jack Thompson Wades Into Fallout 3 Trailer Controversy

October 30, 2008 -

If you thought being permanently disbarred would cause Jack Thompson to ride off into the sunset, guess again.

The ex-attorney is currently seeing fire and damnation in Bethesda's recent recall of Fallout 3 trailer videos. A rambling letter from Thompson to the Federal Trade Commission accuses the ESRB of duplicity in the enforcement of its advertising guidelines:

The ESRB’s [advertising] Principles and Guidelines are not intended to protect the public.  They are obviously intended to protect the video game industry from the public backlash prior to a hyperviolent game’s commercial release.   The ESRB, by allowing such violence in games but not in the advertising is institutionally mandating the cloaking of a game’s real content from the public in advertising.

Thus, the ESRB is actively using its “watchdog” muscle to intimidate game developers into participating in the ESRB’s long-standing shell game by which it has tried to hoodwink Congress and the American people into thinking that the video game rating system is working, that the ratings are reliable, and that minors are being protected from the sale of “Mature” games... 

And, even though Take-Two has zilch to do with Fallout 3, Thompson cannot resist taking a shot at the GTA publisher:

Take-Two, for example, knows that if it adhered to “truth in advertising,” most of its Grand Theft Auto games never would have made it out of the warehouse.  Take-Two has figured out how to collaborate with the ESRB in this shell game by which false advertising cloaks the real nature of their games until the games are released, and then it is too late...

 

Bethesda’s only sin was that it advertised truthfully what its game Fallout 3 is all about.  The ESRB’s idiotic but telling response has fashioned a noose that I expect either the FTC or Congress to slip around the ESRB’s neck...

Full letter after the jump...

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It's a Mystery: Underage Game Sales in the U.K.

October 16, 2008 -

In the United States, secret shopper surveys conducted by the Federal Trade Commission offer a pretty clear idea of how well the video game industry is doing at enforcing ESRB ratings.

But, how often are mature games sold to minors in the U.K.?

No one really knows.

Unlike in the United States, in the UK, BBFC ratings are backed by force of law. But, according to Spong, the British government doesn’t collect data concerning inappropriate game sales to minors.  When questioned about the number of retailers selling video games or DVDs to underage customers over the years, U.K. Labour government minister Vernon Coaker said:

Information on the number of recorded offences of retailers selling video games or DVDs to underage customers is not collected centrally. This is a summary offence and is not included in the police recorded crime statistics.

While Coaker was able to obtain data on “the number of police cautions issued, the number of fines imposed and the average fine,” these figures include both DVD and video game sales.
 
-Reporting from San Diego, GamePolitics correspondent Andrew Eisen.

 

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EA & Take-Two Begin Secret Negotiations

August 26, 2008 -

Now that the Federal Trade Commission has opted not to place any regulatory hurdles in the way of a potential EA-T2 merger, the two publishers will begin meeting behind closed doors.

An filing made by Electronic Arts with the Securities & Exchange Commission late yesterday reads in part:

On August 25, 2008, [EA] and [T2] entered into the confidentiality agreement contemplated by the letter of August 17, 2008 from Strauss Zelnick, Executive Chairman of the Board of Directors of Take-Two to John Riccitiello, Chief Executive Officer of EA, and the letter of August 18 from Mr. Riccitiello to Mr. Zelnick.

 

The terms of the confidentiality agreement prohibit each of EA and Take-Two from, among other things, publicly disclosing the status or terms of any discussions or negotiations between EA and Take-Two unless EA or Take-Two notifies the other that it is terminating discussions. As a result, EA does not intend to make any further announcements regarding the status of any discussions or negotiations with Take-Two unless and until discussions between EA and Take-Two have been terminated or such parties have entered into a transaction. As previously disclosed, EA now requires due diligence to support any proposal to acquire Take-Two and there can be no assurance that any proposal, negotiations or transaction will result.

Among other things, EA will be looking at T2's three-year game release schedule. Not a tough one to figure out: GTA V, Bioshock 2. A GTA MMO would be a nice surprise...

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FTC Okays EA-T2 Merger

August 20, 2008 -

The Federal Trade Commission has posted letters on its website which indicate that it will not oppose a proposed merger between Electronic Arts and Take-Two Interactive.

The letters, written in government bureaucrat-speak, are dated August 18th and read as follows:

The Federal Trade Commission’s Bureau of Competition has conducted a non-public investigation to determine whether the acquisition by Electronic Arts Inc. of Take-Two Interactive Software, Inc. may violate Section 7 of the Clayton Act or Section 5 of the Federal Trade Commission Act.

 

Upon further review of this matter, it now appears that no additional action by the Commission is warranted at this time. Accordingly, the investigation has been closed. This action is not to be construed as a determination that a violation may not have occurred, just as the pendency of an investigation should not be construed as a determination that a violation has occurred. The Commission reserves the right to take further action as the public interest may require.

With the FTC hurdle apparently out of the way, EA and Take-Two are free to attempt to reach agreement on a takeover.

Via: Reuters

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Former Turbine CEO Talks to WSJ about EA-T2 Monopoly Threat

August 20, 2008 -

Yesterday we noted a New York Post report on the proposed EA takeover of Take-Two which claimed that the Federal Trade Commission, scheduled to rule on the merger by tomorrow, might require that T2 spin off one or more of its sports franchises so as not to hand EA a stranglehold on the sports segment of the market.

Heidi Moore of the Wall Street Journal digs a little deeper, interviewing Jeff Anderson, CEO of startup online sports gaming service Play Hard Sports (and former Turbine CEO) concerning his view of potential monopoly issues:

It’s in the best interests of consumers to have a choice. I’m always in favor of having more choice in the marketplace. Look at the ESPN football product when it came out. There was no [NFL] exclusivity agreement then. When Take Two changed its price point, people moved toward the Take-Two product and forced EA to reduce its price. You saw how competition can work in the advantage of the consumer.

 

The question we’re looking at, and what the FTC should be looking at, is whether this will reduce competition. If Take-Two’s sports franchise becomes part of EA, will that influence competition for the better or not? And will it influence prices positively or negatively?

 

Generally I’m not a fan of monopolies in the gaming world. We’re interested in providing a new choice to consumers. As a gameplayer, we’d love to see great games produced by these studios. And we’d love to see them compete.

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NY Post: EA & T2 Trash Talk Despite End to Hostile Bid

August 19, 2008 -

As GamePolitics reported yesterday, EA may have called a cease-fire in its hostile bid to absorb Take-Two Interactive. That development, however, does not mean that the two game publishers are ready to share a hug.

The New York Post reports on snarky (and anonymous) barbs traded between EA and T2:

"To say that EA blinked is a huge understatement," said one source close to the Take-Two camp. "They finally came to their senses and realized this wasn't going to be done their way."

 

A source close to EA countered by suggesting that the company was miffed that it had to make the first overture to Take-Two. The source added that EA officials don't want to negotiate with Take-Two's current management team.

The Post also reports that, while the FTC is expected to bless the proposed merger, it will insist that Take-Two spin off some of its sports franchises, so as not to give EA a complete monopoly on sports games:

Though a deal would combine two of the world's largest video-game publishers, the Federal Trade Commission is expected to give the go-ahead to a potential combination by Thursday on the condition that it divest one or more of its sports gaming franchises, with basketball or hockey being the most likely.

GP: Great mashup (left) of GTA and T2 boss Strauss Zelnick accompanies the NY Post article...

29 comments

EA Extends Deadline for Take-Two Shares; Zelnick Says T2 Has "Multiple" Would-be Acquirers

July 21, 2008 -

 

As expected, Electronic Arts has once again extended its deadline for Take-Two Interactive stockholders to tender their shares at $25.74. The new deadline is August 18th.

EA is apparently beginning to make some progress in its bid to acquire T2. The game publisher says that 11,741,339 shares have been tendered under the offer, nearly double the amount turned in when the previous deadline expired in late June. That is almost certainly related to T2's sagging share price of late. The stock has been trading below EA's offer price, making the deal more attractive to shareholders. TTWO closed on Friday at 25.04

This morning's EA press release links the extension to the Federal Trade Commission's review of potential anti-trust implications:

Extending the tender offer allows the FTC review process to continue. The proposed transaction is still subject to certain conditions that include regulatory approval. EA retains the right to terminate the offer if the conditions are not satisfied.

Coming up later today: Take-Two's obligatory press release explaining why, in its view, EA's offer is a bad deal for shareholders.

UPDATE: Wow, that didn't take long. In a press release which followed EA's by less than an hour, Take-Two, as expected, slams EA's offer. T2 chairman Strauss Zelnick alludes to "multiple" suitors, but does not name them (Activision? Ubisoft?):

We are fully engaged in a formal process to evaluate strategic alternatives that have the potential to deliver greater value than EA's inadequate offer. As part of this process, we continue to engage in meaningful discussions with multiple parties, a number of whom have been conducting due diligence.

UPDATE: In a lively interview wiith VentureBeat's Dean Takahashi, EA CEO John Riccitiello touches on the T2 deal:

Having clever verbal sword play about Take-Two doesn’t really matter. I’m not really playing for a headline in the New York Times...

 

I don’t think we’ve played a poker hand. We have expressed our interest. We have made a public bid. We are in the Hart-Scott-Rodino antitrust review. All of the information has been disclosed. We’re playing it to the way we’ve said we would play it. There have basically been three moves and there have 6,000 articles on it. It’s sort of amusing. I feel a little bit like those strobe light things where it looks like a guy is moving a lot. The flash goes off but the body doesn’t move. Every time a flash goes off, somebody writes a story on it. To be honest with you, the last time there was news was a couple of months ago.

 

21 comments

UK Group Stings Game Retailers

June 26, 2008 -

Earlier this week GamePolitics reported on complaints by UK watchdog groups that online auction sellers were selling 18+ games to underage buyers.

Now the Harrow Observer reports that some game retailers in that part of London have been caught selling mature-themed games in a sting conducted by Harrow Council Trading Standards and Which? Computing. The stores fingered in the report are Woolworths, Game and Maplin.

From the newspaper account:

All three shops have now launched internal investigations into the sales and will face legal action from the council if caught out again.

 

Woolworths sold Grand Theft Auto (GTA) - Vice City Stories.... to the [15-year-old] girl without question. In the Maplin store, the assistant asked the investigator's age, but did not refuse the sale of Hitman, even when she said she was 15.
 
The six other Harrow stores that were tested in the operation in May - Tesco, Argos, Debenhams, HMV, Currys Digital and Entertainment Exchange - all refused to sell the game to the teenager.

GP: While this smcall-scale study almost certainly wasn't conducted with the design rigor of the Federal Trade Commission's secret shopper survey in the US, its results (67% success rate in blocking the underage sale) aren't that far off from the 80% success rate that the FTC found here in the States.

14 comments

Take-Two Plays Hardball with the FTC

June 17, 2008 -

Things are beginning to get ugly between Take-Two Interactive and the Federal Trade Commission.

Attorneys for Take-Two have strongly disputed the FTC's contention that the Grand Theft Auto publisher is stonewalling the government agency's investigation into antitrust aspects of the potential EA merger (see: FTC Hauls Take-Two Into Court Over EA Takeover Bid).

In a document filed yesterday with the U.S. District Court in Washington, D.C., Take-Two fires back at the FTC:

No one at Take-Two Interactive Software, Inc. (“Take-Two”) is seeking to thwart the proper investigation by the Federal Trade Commission (“FTC”) staff of Electronic Arts, Inc.’s (“EA”) tender offer. On the contrary, from the outset, Take-Two has fully cooperated with these efforts, already having produced more than 479,000 pages of responsive documents through the date of this Opposition.

 

The issue before the Court is how the seemingly boundless desire of a government agency for information can be contained in order to save a company from the ruinous costs of compliance with a subpoena that requires it to search virtually every electronic and paper document in its possession, and to make available most of its senior executives for investigational hearings (pre-complaint depositions) in a situation where the company is not even a willing party to any transaction being investigated and where it is quite possible that no such transaction will ever occur.

 

 In the lengthy filing, Take-Two claims that it has been bending over backwards to meet the FTC's demands, including keeping a team of attorneys working over the recent Memorial Day weekend in an effort to supply requested internal documents. Referring to the FTC's conduct as an "abuse" at one point, T2 goes on to assert:

The FTC fails to engage in any meaningful analysis, in either its negotiations or motion papers, of its specific requests. It refuses to acknowledge that compliance with all of its requests would require a comprehensive, company-wide review of Take-Two’s data and documents, which encompass a huge universe of information...

A seperate declaration from a Take-Two attorney claims that it costing the company $50,000 per day in legal bills to meet the FTC's requirements.

Take-Two also submitted a slew of exhibits to the Court. Although no trade secrets are revealed in the publicly-viewable documents, it's clear from their context that the FTC is probing the workings of the "pipeline" by which T2 gets its sports games to market. The company also provided data on its exclusive licensing arrangement with Major League Baseball (MLB 2K8 screen at left) as well as NPD sales data for its sports games from 2001-2007.

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Pachter Analyzes Why T2 is Stonewalling the Feds on EA Deal

June 11, 2008 -

In our previous GamePolitics story we described how the Federal Trade Commission went to U.S. District Court in an attempt to force Grand Theft Auto IV publisher Take-Two Interactive to cooperate in an anti-trust investigation related to Electronic Arts' potential takeover of T2.

So, why would Take-Two thumb its nose in the government's face, even to the point of reneging on previously agreed-upon conditions?

We asked financial analyst Michael Pachter (left), who covers the video game sector for Wedbush-Morgan:

I think that the reasons range from A) being incredibly savvy and holding off the FTC as a tactic to slow the process to Z) being incredibly arrogant.

 

It's hard to know where Take-Two fits on the scale from A to Z.  Their general counsel is pretty experienced, and it surprised me that he would allow the company to deal with a subpoena this way.  The FTC's action of seeking a court order is pretty severe, and shows how seriously the FTC takes this slight.

 

I'm not sure what Take-Two hopes to gain from this, other than the obvious delay to the process.  However, the process won't be delayed if Take-Two's failure to comply with the subpoena results in the FTC granting approval without looking at these documents. There is NOT a presumption of anti-competitiveness, and if EA demonstrates that the combination would not be anti-competitive, Take-Two would be better served to provide evidence to the contrary if it wishes to remain independent.

 

It seems to me that they would be best served by cooperating fully with the FTC, and by pointing to records that show how competitive their business is with EA's business.  Apparently, they have reached a different conclusion.

 

 

UPDATE: So, what's to be gained by delaying? We put that question to Pachter as well:

I think it's always in their best interest to buy more time.  Management has an incremental 720,000 shares of restricted stock that vest if the takeover happens after March 31, 2009.  More time buys them a greater ability to prove the impact that they've had on the company, and they appear sincere in their belief that they have turned Take-Two around.  More time allows Activision to close its Vivendi deal and give Take-Two a look.  Ubisoft might be interested...

 

FTC Hauls Take-Two Into Court Over EA Takeover Bid (UPDATED with GP Exclusive Content)

June 11, 2008 -

Reuters is reporting that the Federal Trade Commission has initiated proceedings in U.S. District Court to compel Take-Two Interactive to respond to the FTC's subpoenas in relation to Electronic Arts' ongoing hostile takeover bid.

As GamePolitics reported last week, Electronic Arts placed its takeover on hold pending the FTC's review to determine whether an EA-T2 merger would violate federal antitrust laws.

GP is currently reviewing court documents. An affidavit by FTC attortney Reid Horwitz alleges that Take-Two reneged on agreements to provide documents requested by the FTC.

Horwitz also writes that the federal agency is particularly interested in the files of Take-Two CEO Ben Feder and Visual Concepts president Greg Thomas, along with several sales and marketing execs, one of whom was formerly the marketing VP for 2K Sports.

Given the government interest in 2K Sports and Thomas, whose studio creates most of T2's sports titles, it's clear that the FTC investigation is centered around a possible monopoly in sports games should the EA takeover occur.

While it may appear odd that T2 would balk at the FTC request, according to FTC attorney Horwitz, T2's position seems to be that it should not be burdened with providing the documents since it was EA that inititated the uninvited takeover attempt. T2 claimed to the FTC that it spent in excess of one million dollars in providing a limited amount of info to the agency.

Horwitz relates that, while T2 agreed to give up some of the requested employee files, it refused to provide files from CEO Ben Feder or Visual Concepts' Greg Thomas. When the FTC asked why, a Take-Two attorney replied:

These individuals were "creative types" who would leave the company rather than allow their files to be searched...

UPDATE: U.S. District Court Judge Henry Kennedy has apparently been persuaded by the government's position, and has ordered Take-Two into court on June 24th to show cause why he shouldn't rule in favor of the FTC.

UPDATE 2: A document filed by Take-Two with the Securities and Exchange Commission provides its comment on the FTC issue:

Prior to the issuance of the FTC’s subpoena and CID the Company has been cooperating fully with the FTC with regard to their review of EA’s Offer to acquire the Company. The Company has already provided enormous quantities of data and access to key executives, and has offered to provide the FTC staff with additional documents and information. Nevertheless, the Company believes the FTC’s subpoena
and CID are unnecessarily broad and would entail unacceptable additional expense to the Company. To limit the inordinate expense and labor that the FTC’s demand would entail, the Company has sought to obtain reasonable limits on the scope of the information sought. The Company will continue to cooperate actively and produce documents in response to the FTC’s previous requests, and will of course attempt to seek an acceptable resolution to this matter as quickly as possible.

 

19 comments

Leland Yee, Parents Television Council React to FTC Ratings Report

May 9, 2008 -

We've got additional reactions to yesterday's report by the Federal Trade Commission which gave high marks to the video game biz for its enforcement of ESRB ratings at point-of-sale.

A spokesman for State Senator Leland Yee (D), architect of California's contested video game law, remarked:
 

The Senator is pleased and commends retailers for significantly improving on the latest FTC study.  Clearly retailers are much more cognizant of the potential harmful effects of ultra violent video games and are not selling such games to minors in as great a number. 

With that said, it is imperative that the industry does more to prevent the sale of adult oriented games to children. Twenty percent of minors can still easily get their hands on games that are inappropriate for them. That equates to hundreds of thousands of children who are potentially in harm's way. The Senator looks forward to continuing his efforts and working with the various interested parties to end the sale of extremely violent video games to children.


Meanwhile, Gavin McKiernan, National Grassroots Director of the Parents Television Council, lauded GameStop for its 94% enforcement record, but said that, as a whole, the video game industry needs to do better:

 
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MattsworknameBIG: how does that make sense?08/05/2015 - 12:18am
Big PermLenny Kravitz penis has been trending all day08/04/2015 - 11:45pm
MattsworknameSo far, Win 8 gave me nothing but problems08/04/2015 - 11:18pm
MattsworknameI;ll see what I can come up with tomarow08/04/2015 - 11:16pm
ZippyDSMleethose is the issue.08/04/2015 - 10:47pm
ZippyDSMleeOdd, even with admin? I have UAC turned off so I do not have to fuss with it too much, also in order to run FO3/NV you need DX,VC++ 010, mmm might try and download VC++ distro pack both 32 and 64bit from 8 to 2012 or so and isntall them see if one of thos08/04/2015 - 10:46pm
MattsworknameTried that 2 zippy, it still wouldn't work08/04/2015 - 10:43pm
ZippyDSMleeI have had to run NV in compatibility mode before. I have both FO3 and NV running fine with a bunch of mods on win8.108/04/2015 - 10:24pm
MattsworknameI did the direct x 9 fix, issue remains08/04/2015 - 10:13pm
MattsworknameI've had issues with it since the start really, as soon as I tried to run it on Win 8.1, vegas woudl crash as soon as i launched it, even when using the base game08/04/2015 - 10:12pm
MattsworknameManta: I run into issues the moment I try to use any mods. and some times even no mods08/04/2015 - 10:09pm
MattsworknameChris ray gun on the gawker media scandel from a few weeks back https://www.youtube.com/watch?v=apGv0KTV9IM08/04/2015 - 10:08pm
black mantaFunny, Matt. I've been able to run it from Steam no problem.08/04/2015 - 10:02pm
Big PermDo you need Directx 9.0c still? Should be a manual download for win 7/808/04/2015 - 9:55pm
MattsworknameBlack manta; I've been trying to get vegas and 3 to work on windows 8 for months and no method I tries fixed it manta08/04/2015 - 9:53pm
Big PermOh wow, yeah cleared my entire history and now suggestions are subs instead08/04/2015 - 9:15pm
Big PermI think you can mecha. Unless it's just removing it from your UI and still tracking it behind the scenes08/04/2015 - 9:11pm
MechaTama31It would be nice if Youtube just let you delete a video from your history, like Netflix does.08/04/2015 - 9:09pm
black mantaF3 and NV have long been since fixed. They run great on Windows 8 and 8.1. And there's also the Unofficial Patch for F3 and the Mission Mojave patch for NV in case they don't.08/04/2015 - 9:05pm
MattsworknameYeah Big, but for those who had the game for long times, it is to late for that08/04/2015 - 8:43pm
 

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