02/09/2020

This article explores the potential application of Australian consumer laws to some current advertising practices in the mobile game market.

Mobile gaming has come a long way since ‘Snake’ launched on the Nokia 6610 in 1997, or the invention of the Wireless Application Protocol (WAP) which first allowed developers to sell games to would-be gamers over a mobile network. Now, Apple’s App Store alone boasts more than 500 million visitors per week browsing over 4 million apps. Almost 25% of these apps are games, putting it in first place (by a significant margin) as the most popular app category.  The video game industry is predicted by some to be a $300 billion industry within 5 years, with mobile gaming continuing to lead the pack.

This unprecedented growth in the mobile games market, along with the development of new monetisation models and advertising technologies, has resulted in dramatic increases in the volume and variety of advertising. 

Unlike advertising on traditional forms of media (for example, on television, radio, print media, outdoors), online advertising is almost completely unregulated, with advertisers and their platforms often located outside of Australia. 

This article focuses on the rise of ‘fake ads’ in mobile gaming - the use of completely unrelated gameplay footage in mobile game advertisements.

“Fake ads”? What you see is not always what you get.

Mobile game advertisements are now commonly drawing players in with bold CGI animations or depictions of an innovative game mechanic or gameplay, only to provide an experience (or even genre of game) completely different from what was advertised. One YouTuber has archived this deceptive practice in a video series called ‘Mobile Game Ads vs. Reality’ (at the timing of writing, up to instalment twelve), juxtaposing advertisements with the actual games which bear no resemblance.

The large volume of mobile games that appear to depict “fake ads” suggests that this practice is being adopted by a range of mobile game providers. 

For the Australian consumer, the question is whether this form of advertising constitutes misleading and deceptive conduct under Australian Consumer Law (ACL)?  And if so, who is liable?

Is it misleading and deceptive conduct?

Section 18 of the ACL states that “[a] person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.” This applies even where there was no intention to mislead or deceive, and where no actual damage has been suffered as a result of the conduct.

The test involves an objective question of fact to be determined by considering the conduct as a whole, including all circumstances of the particular case, namely whether the conduct is likely to mislead or deceive members of the class of persons to whom the conduct is directed. The courts will take into consideration the characteristics of the targeted class of consumers to determine if the representation is likely to mislead or deceive not an insignificant number of reasonable members of that class.

This test can be difficult to apply.  However, as a general observation, an advertisement that presents a product in a completely different light from what that product actually is, is running a very obvious and substantial risk.  In the case of mobile games, advertisements that purport to show gameplay footage (for example, by showing a cursor interacting with what appears to be the game’s mechanics) risk falling foul of the rules against misleading or deceptive conduct where the gameplay is, in fact, very different in nature from the footage advertised. 

This form of advertising is different from more traditional forms of advertising for video games, which show a dramatic (or even cinematic) representation of the game’s storyline or themes.  In these cases, the advertisement is displaying something that is obviously not representing gameplay footage, or is accompanied by a label indicating as much.

Courts have held that the mere fact that there is debate as to whether conduct may or may not be deceptive can, in and of itself, be an indicator of deceptive conduct.

Can a deception be remedied?

Is it a defence that consumers have the opportunity to remedy the deception before actually spending any money?

In other words, even though the consumer may be presented with a misleading ad on a social media platform, once they reach the relevant platform to download the game, they are presented with far more credible screenshots of what the game actually looks like. And even then, if you download the game for free, you know very well what the game experience actually is before you reach the point of in-app purchases.

There are numerous issues with this line of thinking, including that it makes certain assumptions about consumer behaviour in order to salve otherwise potentially infringing conduct.  Speaking generally, there is no reason in principle as to why the free-to-play model, by its nature, ought to be immune from laws regulating misleading advertising.  The ACL does not require any particular loss or damage to have been suffered by a consumer for advertising to be considered misleading or deceptive.

The proof of the pudding is in the eating

Long gone are the days of needing to anticipate what kind of ad content will engage a consumer and sell a product. The reality now is that the algorithm knows best - create multiple versions of an ad, and the black box that is many advertising platforms will work to disseminate the one that promotes the most engagement.

This phenomenon is the subject of recent research into game ‘audience-affinity’ (i.e. the potential of a player who plays one game genre to enjoy another), which has shown that misleading ads may work because they expand a genre’s player base. By way of example, there may be a strong correlation between a player who enjoys car racing games and one who enjoys city-building games - the problem for game developers is that the player just doesn’t know it yet. So, the player is shown an ad for a car-racing game, only to download a city-building game and voilà, market audience has expanded!

The increasing prevalence of “fake ads” suggests that, at some level, those ads work.  That is, they drive users (and therefore revenue) to the games in question.  However, the effectiveness of misleading advertising does not make the practice any more legal or ethical. 

Does the ACL apply to overseas games developers?

The ACL extends to entities located outside of Australia who are conducting business in Australia.  What constitutes “conducting business in Australia” can be difficult to ascertain. 

The recent case of Valve Corporation v ACCC considered this question and held that Valve, a video game delivery platform, was liable under the ACL to consumers in Australia despite being incorporated in the USA and having no local physical presence. This was due to Valve, among other things, having a large body of customers located in Australia from which it earnt significant revenue on a repetitive and ongoing basis.

Who may seek remedies for misleading and deceptive conduct?

Typically, in any claim for misleading and deceptive conduct, the most obvious classes of plaintiff are members of the public (i.e., the consumers) who have suffered loss as a result of the misleading and deceptive conduct, and the ACCC.  Typical remedies sought include statutory damages and injunctive relief. 

However, the ACL does not limit the field of plaintiffs to consumers and the ACCC only.  Under section 236 of the ACL, any person may seek an injunction preventing a person from engaging in misleading and deceptive conduct.  This would include other games developers who do not engage in “fake ads” and who wish to prevent their competitors from having an unfair advantage.  The nature and scale of loss that is suffered by “honest” competitors is likely to far exceed the loss that is suffered by any individual customer (although this is not a requirement to seek relief under the ACL). 

Conclusion

This is an area where the law has lagged behind what is happening in the market.  Although existing laws ought to be adequate to prevent and punish “fake ads”, no action has been taken, to date, under these laws.  However, as community awareness of “fake ads” becomes more widespread, it is only a matter of time before the rise of “fake ads” is tested before the courts.

 

Authors: Andrew Hii, Alexander Ryan and Jack Corcoran

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