What happens when a game with virtual goods closes?

This is a post by Jas and Jonny Mayner. 

As reported last week (see here and here) casual game developer ZipZapPlay (owned by PopCap since April 2011) will be putting up the “Shop Closed” sign at Baking Life on 31st January 2012. The Facebook game reportedly once attracted 6.7 million users per month, but at present only around 760,000 users are rolling their virtual dough each month. 

Speaking of virtual dough, in a statement on the game’s Facebook page, ZipZapPlay have told users that “All virtual currency (Zip Cash) and virtual items will be lost after January 31st. Any remaining Zip Cash (even if it was purchased and unused) is not transferable between or among different games or applications and is not redeemable for any sum of money or other monetary value.” 

This has led to familiar grumblings on forums and news sites about the legality of cutting off access to virtual worlds, including virtual goods and currency that gamers have invested time and real money in accruing.   So we thought we’d think about this: what are the legal implications if a game which sells virtual goods closes?

The legal bit:
Gamers’ relationship with the developer, including regarding virtual goods in a game, is typically set out in T&Cs, which as a rule are pretty clear about who owns what.  For example, in the ZipZapPlay T&Cs, the very first paragraph is headed “Limited Licence to Use; Ownership” and reads:

“Unless otherwise specified, the Baking Life App, virtual currency, virtual items, all content, text, graphics, logos, button icons, images, audio clips, digital downloads, data compilations, and software contained on the Baking Life App (collectively the “Materials”) are the property of ZipZapPlay, or their suppliers, … You may access and use the Baking Life App and the Materials only for your personal and non-commercial use”. (underlines added)

In other words “we own all this stuff but you can play with it”. There are plenty of other examples throughout the Terms whereby ZipZapPlay are pretty clear that money paid for virtual currency is non-refundable and that they can deny access to the game for any reason.  This is pretty standard in the games industry: pretty much any game which uses virtual goods/currency will say something like it.

So, legally, what could consumers do about it when a game closes down and shuts off their access to virtual currency/goods?

(1) Argue that they have property rights in the virtual goods

The main problem is the absence of a proper cause of action or legal basis for a claim. As discussed on Gamer/Law previously, issues of virtual property and virtual currency have to date been considered to be matters of contract law (although any alternative view has not been tested in front of a court so we don’t know their legal status for sure). The relevant contract in this instance is the Baking Life Terms of Service which users accept before they can access the game and which incorporate the End User Licence Agreement between ZipZapPlay and each user.  

So, a developer in this situation would point to the contract and says that resolves the matter entirely: gamers have no rights in virtual goods, end of case.  But the gamer would need to persuade a judge that the contract alone cannot be the answer – the fact that the gamer has been sold virtual goods means that he/she has acquired some kind of additional property rights, meaning the game can’t just be shut down.  At most, they should have continued access to the game and at the least they should get compensation.  But that would be a tough argument to run, given the lack of any legal precedent.  Still, sooner or later, we’re likely to see something like it being run…

(2) Argue the contract is unfair

Many countries have consumer protection laws which make certain contracts with consumers void in certain situations.  EU law in particular has a powerful consumer protection regime, which among other things makes contract terms that cause a “significant imbalance” in the supplier/consumer relationship void unless they are “reasonable”.  This could apply to a term in  game T&Cs that allows the developer to close the game just like that.

Would that convince a judge?  We don’t know, since it’s never been tested and – more generally – the application of those consumer protection laws to digital products is pretty untested too.  That said, there’s at least a fighting chance that it could work.

(3) Other legal means

There may be other legal means that a gamer could pursue, for example to claim that the advertising/marketing of the game was unfair/illegal if in fact access to virtual goods could be shut down at any time, or possibly to argue that the developer made some sort of misrepresentation to encourage him/her to agree to the T&Cs.  If ZipZapPlay somehow represented to users that they would in fact have property rights over their virtual goods and virtual currency held on account (and there’s no evidence of that), and if users relied specifically on that representation when deciding to accept the Terms, play the game and hand over real money, then those users might have a claim in misrepresentation. So that’s a few “ifs” adding up to a “might”. Tenuous stuff. 

What does all this mean?

It means that, at the moment, developers could close down a game and all access to virtual goods in it, at any time and without offering any compensation, and any legal challenge against it would be difficult.  But it is only difficult because there is no precedent – it is entirely possible that someone could mount a test case against this kind of thing at any time.  In fact, tests cases have previously been started but not finished: similar issues were raised in the Evans v Second Life case in the U.S. and we’ve not heard anything about that for a while.
Sooner or later, the games industry is going to have to tackle the issue that they are promoting the purchase of virtual goods and currency without actually giving much legal comfort to consumers against them.  Clearly, exactly how far that protection should go can fairly be debated and will depend on the kind of game and virtual good – but it still needs to be discussed.  Otherwise, we might find judges and regulators getting involved.

In the meantime, expect more game closures and more complaints.  Sometimes that might lead to the developer making offers like Zynga did when it closed down Street Racing, sometimes it might just fizzle away – but sometimes it might lead to a legal fight.  [Jas: personally, I suspect that would be a legal fight in the form of a class action lawsuit by lots of people affected by the loss of their small-value virtual goods, like if a game closed, or possibly by a single person affected by loss of access to a very high value virtual good – e.g. the $330k value Crystal Palace Space Station in Entropia Universe)].Would this really happen?  These days, I don’t even bother with people asking me whether virtual goods could really ever be the property of a user.  I just point them to this case of a UK man being JAILED for stealing Zynga Poker chips.

More generally, think about this: given that a big part of the appeal of these titles is the creation and control of an ongoing world (be that a bakery, kitchen, farm or something else) how many customers will be motivated to spend any more time in that world with a closure date looming? Baking Life players are being directed to other PopCap titles, but there are bound to be a lot of customers out there whose disappointment at the loss of a favourite game will be compounded by the nagging sense that investing time and money in social games might just be a waste of both. If these sorts of title sunsets occur with any regularity will customers move away from buying virtual goods altogether?[Postscript by Jas: I realise of course that this definitely isn’t the first game featuring virtual goods to close down – even in the last few years, the social games giants have killed off plenty of underperforming games featuring virtual goods.  Our thinking behind this post was more to show what the arguments would be if there was a legal fight over such a closure, as well as to suggest more generally that we think the time is coming when there will be more of those legal fights than we’ve seen so far.  That will very intimately be bound up with how virtual goods themselves are being used ofc – as we’ve noted before, social games virtual goods have been treated different to virtual worlds virtual goods for example.]

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22 thoughts on “What happens when a game with virtual goods closes?”

  1. Whilst you can't place an obligation on a developer to continue making a particular game available to the public, it does seem unfair that a company is willing to accept real currency in exchange for in-game currency but not vice-versa.

    Perhaps in the future, there will be traditional currency exchanges operating in the digital medium.

    Of course this won't offer any protection where a currency is wiped out. In that regard, even offering a 50% refund to gamers would go some way to appease them.

    I'm not familiar with any real world examples of a currency being wiped out overnight with no substituted currency being issued. Of course, there would an absolute uproar if this took place.

  2. There's BitCoins as an 'actual currency.

    Games like Entropia Universe allows both buying and selling of Entropia dollars in exchange for actual currency at a fixed exchange rate (a small number of people sell physical goods to purchase large amounts of digital content). Of course this is also a can of worms: fun topics such as tax evasion become a big deal.

    Also the game developer really has to know their economy. A bug in a normal game (or even one where you can buy stuff but not sell it) is one thing. In a game where you can sell virtual items for cash it's a bigger problem. You could end up loosing significant amounts of money in theory.

  3. I'm reminded of the classic Latin phrase, "Caveat emptor". Let the buyer beware.

  4. Quick thought — how does the European Union e-Money Directive apply to in-game funds and transactions? Plus what about the new rules regarding pre-paid debit cards and related e-money accounts?

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