Under the current Game Industry Promotion Act (the “GIPA”), a person who produces, distributes or provides games for the purpose of distribution or use (“game provider”) is required to indicate the type of loot box available in the game, along with information on the probability of obtaining each item per type of loot box, in the game, website, and advertising and promotional materials (Article 33, Paragraph (2) of the GIPA; the “Disclosure Requirements”). When a game provider fails to indicate or falsely indicates information on loot box probabilities, the Ministry of Culture, Sports and Tourism can first recommend that the game provider comply with corrective measures, and then issue a corrective order to the game provider if it fails to comply with such measures (Article 38, Paragraph (9) of the GIPA). If the game provider fails to comply with the corrective order, it can then be subject to imprisonment for up to two years or a criminal fine of up to KRW 20 million (Article 45, Item 11 of the GIPA).
The Disclosure Requirements for loot boxes have been in effect since March 22, 2024. Recently, the National Assembly passed an amendment to the GIPA (the “Amendment”), which introduces new rules for disputes and lawsuits involving game providers’ violation of the Disclosure Requirements. From the perspective of civil litigation, the Amendment makes it easier for game users to obtain compensation from the game providers for game providers’ violation of the Disclosure Requirements.
Key Changes
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1. |
Adoption of New Litigation Rules |
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(1) |
The Amendment will hold the game providers liable for damages to users if their violation of the Disclosure Requirements caused harm to users. In general, the burden of proof lies with the users seeking damages from game providers to prove that their willful misconduct or negligence resulted in harm to the users. However, the Amendment shifts the burden of proof to the game providers to prove that there was no willful misconduct or negligence on their part in violating the Disclosure Requirements (Article 33-2, Paragraph (1) of the Amendment). |
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(2) |
If it is considerably difficult to prove the amount of damages due to the nature of the relevant facts while the harm itself is acknowledged to have arisen from the game providers’ violation of the Disclosure Requirements, the Amendment will allow a court to calculate a reasonable amount of damages by comprehensively considering all circumstances (Article 33-2, Paragraph (2) of the Amendment). |
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(3) |
The Amendment will introduce a punitive damages system so that a court can award treble damages (Article 33-2, Paragraph (3) of the Proposed Amendment). In determining the amount of damages, the following must be considered: (i) the extent to which the game provider was aware of the possibility of willful misconduct or harm; (ii) the harm caused to the users due to the game provider’s violation; (iii) the game provider’s economic benefits earned from its violation; (iv) the duration and frequency of the violation; (v) the administrative penalty imposed for the violation; and (vi) the game provider’s efforts to remedy the harm (Article 33-2, Paragraph (4) of the Proposed Amendment). |
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2. |
Operation of a Damage Reporting and Relief Center |
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3. |
Enforcement Date of the Amendment |
Implications
With continuing disputes over loot boxes, the Korean regulators continue to strengthen regulations. Since the introduction of the Disclosure Requirements, GRAC has been actively monitoring and cracking down on violations. The Korea Fair Trade Commission, Korea’s competition and consumer protection agency, has also been conducting independent investigations from e-commerce regulation and consumer protection perspectives. Given that the burden of proof on users will be significantly eased once the Amendment comes into force, users are more likely to file lawsuits against the game providers for alleged violations of the Disclosure Requirements.
Therefore, prior to the enforcement date of the Amendment, game providers should conduct a review of whether their disclosure of probabilities of loot boxes are properly indicated as required by law.
