As explained in our previous newsletter (Link), the amendment to the Enforcement Decree of the Game Industry Promotion Act (the “GIPA”) became effective on March 22, 2024 to require game service providers to disclose loot box item probabilities. Subsequently, the relevant authorities are now actively enforcing the new loot box regulation.
The Game Rating and Administration Committee (the “GRAC”) has been monitoring whether game service providers have disclosed the loot box item probabilities, and in early April, the GRAC requested both domestic and overseas companies that failed to comply with the disclosure requirement to correct their non-compliance. Companies that do not make the requested correction can be subjected to a corrective order issued by the Ministry of Culture, Sports and Tourism (the “MCST”) under Article 38, Paragraph (9) of the GIPA, and failure to comply with such corrective order can result in imprisonment for up to two years or a criminal fine of up to KRW 20 million under Article 45, Item 11 of the GIPA.
It is notable that on March 15, 2024, even prior to the effective date of the amended Enforcement Decree of the GIPA, the MCST released an English version of the Guideline on the Disclosure of Loot Box Item Probabilities, which shows the MCST’s dedication to enforcing the new regulation by actively informing overseas companies of the regulatory changes.
Meanwhile, the Korea Fair Trade Commission (the “KFTC”) – the authority enforcing the Act on the Consumer Protection in Electronic Commerce (the “E-Commerce Act”) – has also been monitoring the loot box item probability issue from the E-Commerce Act perspective even before the amendment to the Enforcement Decree of the GIPA. Earlier this year, the KFTC imposed an administrative fine and corrective order against a Korean game provider on the ground that it violated the E-Commerce Act by not disclosing changes in loot box item probabilities. This month, the KFTC is again conducting on-site investigations on major Korean companies regarding loot boxes.
As it is expected that various regulatory bodies will actively enforce the loot box item probability disclosure requirement, there would be both legal and business risks for not complying with applicable regulations (e.g., game users may file civil lawsuits against game companies regarding the accuracy of loot box item probabilities). In fact, earlier this year, there was a mass tort action filed by over 500 game users against a Korean game provider that had previously been sanctioned by the KFTC for violation of the E-Commerce Act. Given these enforcement trends, game companies are advised to carefully check their loot box item disclosures to minimize the risk of civil, criminal and administrative risks.
