‘From regulations to culture’… Amendment to the Gaming Act, risk management that companies must take care of

The industry's expectations for changes in the gaming industry law are rising with the overall revision of the Game Industry Promotion Act (hereinafter referred to as the Game Act Amendment). In the past, when the law was enacted in 2006, games were viewed as objects of ‘regulation and management,’ but this amendment recognized games as creative works and shifted the paradigm to ‘culture and promotion.’ However, paradoxically, the transition period when the system changes rapidly is also the most dangerous time for companies. If you look at the details, conflicts with other existing laws or ambiguity in interpretation still remain as legal gaps or risks.
 

The first thing to watch out for is the conflict between the expansion of autonomous classification and the Youth Protection Act. The revised bill seeks to expand the scope of private autonomous rating classification to include games not available to youth, but Article 7 of the current Youth Protection Act (Review and Decision on Media Harmful to Youth) grants the authority to review media harmful to youth to a national agency (Youth Protection Committee). Even if a company starts a service through its own rating classification in accordance with the revised Game Act, if it is found to be in violation of the Youth Protection Act or is deemed ineligible for a rating after the fact, it may fall into the trap of double regulation in which the responsibility lies solely with the company.

Changes in standards for judging speculativeness should also be noted. While the existing gaming law regulated all games in an integrated manner, the revised bill divided the regulatory system into 'digital games' and 'specific location-type (arcade) games'. The intention is to strictly manage arcade games with high risk of gambling, while relatively easing digital games. The problem arises here. Even if it is a digital game, there is a separate definition for games that simulate gambling activities such as Go-Stop and Poker. Even if it is a general RPG or casual game, there is still a risk that it will be classified as a regulated 'game imitating gambling' if the probability item presentation or mini-game method is judged to imitate gambling.

The deletion of the ‘prohibition of giving away prizes’ clause that applied to digital games is also an opportunity and a trap. The amendment allows the provision of prizes only for digital games, enabling various business models. However, the key is convertibility (possibility of converting into cash). This is because the moment the given prize is traded for cash through an item trading site, etc., it can be considered gambling.

Amid such uncertainty, companies must not only thoroughly prevent legal disputes, but also establish a detailed defense strategy that can prove that there was no intent or fault. First, in order to resolve the risk of autonomous rating classification, a self-rating deliberation committee must be established within the company and the discussion process must be kept in detailed meeting minutes. This proves that the company has faithfully fulfilled its duty of care based on the contents of a thorough review in accordance with the standards of the Game Management Committee.

Additionally, in order to prepare for speculative issues, a probability verification report must be prepared from the planning stage and managed in conjunction with server logs. In particular, before launching, it is a good idea to obtain a legal opinion regarding the BM (profit model) structure from an external law firm or professional organization stating that the system does not constitute a gambling simulation game. This serves as a strong shield for the company to defend in the future that it was not aware of the illegality.

Lastly, in order to prevent the risk of exchanging prize money, it is not enough to include a prohibition clause in the terms and conditions. A technical lock-in device must be put in place, such as attaching items given as prizes to an account to block transactions at source or restricting the use of items. In addition, if you constantly monitor item brokerage sites and regularly produce operational action reports that sanction accounts that attempt to exchange currency, you can avoid charges of aiding and abetting speculative practices that may arise in the future.

It is welcome that the law recognizes changes in the industry and eases regulations. However, lowering the regulatory barrier also means that the area for which companies are responsible has expanded. Preparing objective data and documented evidence to support an aggressive strategy for business expansion. This will be the surest survival strategy for the gaming industry facing a regulatory transition.
 

Small Business Team

[View full article]
'From regulation to culture'... Gaming Act Amendment Bill, Risk Management that Companies Must Take Care of (Shortcut)