Table of contents
Online Gambling News
Advertising for (Online) Gambling in Germany – Status Update
B2B game approvals – Is the market bound to fail due to the way it deals with game developers?
Online Games News
Update of legal note on Loot Boxes product
Gaming law assessment of Lootboxes in Austria
Lootbox judgement from Austria - Game over for FIFA Packs also in Germany?
Inhouse News
Advertising for (Online) Gambling in Germany – Status Update
Lawyer Yannick Skulski
Salary Partner at Hambach & Hambach
The Interstate Treaty on Gambling 2021 represents a paradigm shift with regard to the regulation of advertising for games of chance and has abolished the fundamental ban on advertising and the separate reservation of permission under the predecessor state treaty. Instead, advertising for approved gambling offers is permitted. The achievement of the objectives of the Interstate Treaty - in particular the protection of players and minors, but also the channelization of players to licensed offers - is to be ensured by the statutory provisions of Section 5 GlüStV 2021 and the ancillary advertising provisions of the permit. In the event of violations by the permit holders, the Joint Gaming Authority of the Federal States (GGL) can impose supervisory measures and fines on the permit holders.
Against this background, the following article will provide an insight into the latest developments.
Fine against permit holder for affiliate marketing
Affiliate marketing is a type of online marketing in which companies advertise their services (or products) via partners known as "affiliates". In this process, a commission is paid to the affiliate if the affiliate arranges a purchase or other desired action by the customer. This usually works as follows: The affiliate promotes the company's product or service on his own website, social media channel or other online channels. In doing so, he places a special link or an advertising banner on his page that directs the user to the company's offer. If the user reaches the company's site via this link and performs a desired action (usually registration with the gambling provider), the partner receives a previously agreed remuneration.
This is precisely where Section 5 (6) sentence 1 GlüStV comes into play:
"No variable remuneration, in particular remuneration based on turnover, deposits or stakes, may be agreed or paid for advertising on the Internet for games of chance in which banned players are not permitted to participate pursuant to Section 8 (2), in particular in the form of affiliate links."
The actual design of affiliate marketing is regulated in more detail in the ancillary provisions to the organizer permits. There it states:
"The third parties commissioned with advertising shall be obligated - in particular also in the case of online advertising on third-party sites - to comply with the statutory provisions as well as the provisions of this notice. The obligations shall be passed on - especially in the case of affiliate marketing - to the persons responsible for the individual advertising."
"All advertising content (text, images, sound, moving images) of the licensee on websites of affiliates must be clearly marked as such. This does not apply to editorial content created by the affiliate on its own responsibility, such as testimonials on comparison portals. When calling up the Website, a reference to the Affiliate's remuneration in the event of registration with the gambling providers shown must be made in a clear and easily perceptible manner
shape and size to appear. The duration of the insertion of the notice must be such that an average user is able to fully absorb this information."
and
"Affiliate marketing is only permissible on condition that the affiliate's website only links to gambling offers from organizers that are in possession of a corresponding permit in accordance with the State Gambling Treaty 2021."
GGL invoked a violation of the latter ancillary provision when it imposed a fine on a permit holder for the first time (https://www.gluecksspiel-behoerde.de/de/news/245-ggl-verhaengt-erstmalig-ordnungswidrigkeitsbescheid-in-fuenfstelliger-hoehe-gegen-erlaubnisinhaber-aufgrund-von-verstoessen-gegen-werbebestimmungen ).
The issue throws an interesting spotlight on the question of where permit holders can best draw attention to their offerings. According to GGL, the intention of the State Gambling Treaty is "to ensure player protection by strictly separating legal from illegal offers." On the other hand, the providers are likely to be of the opinion that players already interested in gambling obtain information on precisely these affiliate sites and comparison portals, and that these websites are therefore particularly well suited to drawing attention to the offers of permitted providers.
Legal proceedings against the ancillary advertising regulations
2022, the first licenses for virtual slot machines and online poker were issued. In addition, new licenses for sports betting were issued "at the last minute". Even though the two areas are inherently different, they now have an almost identical extensive catalog of around 30 different regulations/restrictions for advertising.
It is no secret that the current advertising restrictions, as contained in the permits for virtual slot machines, online poker and sports betting, are not a product of the GGL now in charge, but still date back to the College of Gambling.
It is still uncertain how the new supervisory authority will position itself in the long term and whether it will take the opportunity to correct the current advertising restrictions if necessary. Obviously, it was the wish of the Gaming Board that the GGL understands the current ancillary provisions on advertising as an important preliminary design in the interpretation of Section 5 GlüStV for a decision guideline on advertising.
However, significant changes in the catalog of advertising restrictions are to be expected, particularly with regard to the current total bans on certain forms of advertising. At present, it seems to be a task for the courts to legally evaluate regulations such as the total ban on out-of-home advertising, advertising for free-to-play offers, influencer marketing and cooperations with streamers.
In the case of influencer marketing, there is already an initial indication from the Hamburg Administrative Court (decision of December 20, 2022 - 14 E 3058/22). Although the parties involved have agreed on the settlement of the proceedings on this point, the court felt compelled to comment on this in the context of the decision on costs.
The most important finding from this decision is certainly that the supervisory authority must recognize that there has been a fundamental change in gambling law with the new State Gambling Treaty: The Düsseldorf Administrative Court (ruling of May 10, 2022 - 3 K 4295/19) spoke of a caesura in a decision from 2022; the Hamburg Administrative Court now speaks of a " fundamental systemic change in advertising regulation."
The current decision was issued in connection with the ancillary provisions of a license for a social lottery. However, it is also of great importance for operators of virtual slot machines, online poker and sports betting.
This is because the advertising provision can also be found word for word in the current licenses for online gaming providers. The associated justification is also identical. The ancillary provision is justified by the fact that the advertising content cannot be influenced. This means that it is no longer guaranteed for the operator that the requirements for advertising in the GlüStV and in the ancillary provisions of the corresponding license are met. This is because influencers are not only concerned with fulfilling the contractually promised advertising content, but also to a very considerable extent with achieving attention and resonance in consumer and business circles. The prohibition of influencer marketing can be derived from the limitation requirement and the prohibition of excessiveness as well as the requirement of objectivity pursuant to Section 5 (2) sentence 2 GlüStV.
"With the objective of ensuring in particular the protection of minors and the protection of gamblers at risk, the ancillary provision No. 5. n. does indeed pursue a legitimate purpose. However, the provision is not suitable for achieving the purpose due to the "fundamental systemic change in advertising regulation" - as the respondent rightly describes the new regulation - associated with the State Treaty on Gaming 2021. Moreover, it is not necessary for the achievement of this purpose.... [...]
Against the backdrop of the requirements for advertising for permitted gambling pursuant to Section 5 (2) GlüStV 2021, it is likely to be disproportionate - as the respondent also argues in the result - to impose a blanket ban on advertising by influencers even if the advertising is "scripted" and controlled by the holder of the permit, i.e. in this case the respondent, and is thus attributable to the permit holder without restriction. The view of the defendant that the term "influencer marketing" should be narrower than the term "popular concept of influencer" is not apparent to the court (see Troge, Herausforderung: Influencer-Marketing, GRUR-Prax 2018, 87, 87; see also. Henning-Bodewig, Influencer-Marketing - der "Wilde Westen des Werbens", WRP 2017, 1415, 1415; Lehmann, Lauterkeitsrechtliche Risiken beim Influencer Marketing, WRP 2017, 772, 772f.; Mallick/Weller, Aktuelle Entwicklungen im Influencer Marketing - Ein Blick in die Praxis, WRP 2018, 155, 155f.). A conceptual distinction of influencer and influencer marketing based on whether the activity of the influencer is based on a manuscript cannot be inferred from general linguistic usage. So-called "influencers" are bloggers in social networks who have a large reach thanks to a large number of so-called "followers" (users who follow them in the respective social media channel) and are interesting for advertisers because of their credibility and their target-group-specific influence (Troge, loc. cit, 87; see also Henning-Bodewig, loc. cit., 1415; Lehmann, loc. cit., 772f.; Mallick/Weller, loc. cit., 155f.).
[...]
Irrespective of these "conceptual misunderstandings", the ancillary provision No. 5. k. should also - like the ancillary provision No. 5. n. - not be necessary on the basis of Section 5 (1) sentences 1, 2 GlüStV 2021, since the holder of a permit pursuant to Section 4 GlüStV 2021 is already permitted by law to commission third parties only with the implementation of advertising, but not with the unauthorized design of advertising. Furthermore, there is no need for a further ancillary provision which, in any case, is intended to make the same provision as a result and only permits advertising measures with influencers insofar as these are based on a manuscript controlled by the permit holder."
In addition, the court ruled on another provision, namely the obligation to disclose the advertising restrictions to all third parties entrusted with advertising, in particular to affiliated companies.
If the GlüStV already does not permit the licensee to leave the design of advertising entirely to third parties because it is fully attributable to the licensee, there is no need for the ancillary provision in question. If the license holder were to grant a third party design leeway in advertising contrary to Section 5 (1) Sentence 2 GlüStV 2021, the gambling supervisory authority can take effective action against the license holder. The ancillary provision at issue is therefore already not suitable for achieving the objective of promoting the fight against gambling addiction. It is also not necessary, as the gambling supervisory authority - should the licensee, contrary to Section 5 (1) sentence 2 GlüStV 2021, give the commissioned third party discretion in the design of advertising - can issue the necessary orders in individual cases against the licensee pursuant to Sections 9 ( ) 1 sentence 2, 3 no. 2, 9a (2) sentence 1, 2 GlüStV, irrespective of the ancillary provision in the license, in order to counteract unlawful conduct.
The decision is not binding on the Halle Administrative Court, where most court cases brought by online gambling operators are decided. However, it is a strong indication that the advertising restrictions will not remain in their current severity - this applies in particular to the undifferentiated total bans on some forms of advertising.
Outlook
Advertising will continue to be a particular focus of the new Joint Gaming Authority - not only in enforcement against advertising for unlicensed gambling, but also in the supervision of licensed offerings. The current total bans on certain advertising media are already under bad omens, as the recent decision of the Administrative Court of Hamburg shows.
It will be particularly interesting to see how the GGL will continue to position itself on the supervision of advertising for permitted gambling offers. In addition, it can be assumed that the courts will issue their first rulings on the legality of ancillary advertising regulations in the course of 2023.
B2B game approvals – Is the market bound to fail due to the way it deals with game developers?
Attorney Phillip Beumer
Senior Associate at Hambach & Hambach
Although since the entry into force of the new Interstate Treaty on Gaming 2021 on 1 July 2021 (ITG), the procedure for license holders organising virtual slot machine games to apply for a permission for individual slot machine games has also been opened, neither courts nor specialist literature have, as far as can be seen, publicly dealt with the previous progress and the legal problems of section 22a paragraph 1 ITG. In the following, after a brief description of the legal basis, the procedure to date at the competent supervisory authority will be presented. Subsequently, the article aims to outline the specific requirements of the application procedure under section 22a paragraph 1 ITG and to propose solutions to optimize the procedure in terms of the objectives of section 1 ITG.
The regulatory model of the ITG for operating virtual slot machine games
In Germany, virtual slot machine games, like sports betting and online poker games, are subject to an additional permission, which is intended to ensure compliance with the provisions of the Interstate Treaty on Gaming 2021 (hereinafter “ITG”) for the respective game. Holders of a license for operating virtual slot machines may only offer a virtual slot machine game if this has previously been permitted by the competent authority upon separate application. If, on the other hand, the licensing requirements for a virtual slot machine game are met, the operator has a claim to the granting of the individual game-related approval (Peters, in Dietlein/Ruttig, sec. 22a ITG, marginal no. 11).
The central norm for the regulation of virtual slot machines is section 22a ITG. Paragraph 1 states:
"(1) The design of virtual slot machine games must not run counter to the objectives of § 1. Holders of a licence for the operation of virtual slot machines may only offer a virtual slot machine game if this has previously been permitted by the competent authority upon their application. A version of the game shall be made available to the authority for the purpose of reviewing the granting of permission. Significant changes to virtual slot gaming after the granting of a permit pursuant to sentence 2 shall require the permission of the competent authority. The permit pursuant to sentence 2 may be revoked at any time unless it would have to be granted again at the time of revocation. Virtual slot machine games that are not permitted pursuant to sentence 2 are unauthorised games of chance."
Permission is granted by the Joint Gaming Authority of the Federal States in a uniform procedure (cf. sec 27f para. 1 ITG). In the licensing procedure, it must be examined in particular whether the requirements of section 22a paragraph 2 to 8 are met (e.g. requirements regarding the content of the rules of the game, display of the probability of the maximum win, maximum stake, average minimum playing time). Contrary to the statements in the explanatory notes to the ITG 2021, paragraphs 9, 10 and 12 are not prerequisites for granting of the individual permissions, but rather operator obligations (even further: Peters, in Dietlin/Ruttig, sec. 22a ITG, marginal no. 7, who also does not include compliance with the prohibition of the term “casino” from sec. 22a paragraph 11 ITG as a prerequisite for granting of individual games permissions; contrary: Dünchheim, sec. 22a ITG 2021, marginal no. 49). The design of the virtual slot machine game must also not run counter to the objectives of section 1 ITG. In any case, games that are aimed at minors, for example in the form of their external design, do not correspond to the objectives of section 1 ITG. Certain combinations of light and sound effects, which according to scientific findings significantly increase the risk of addiction, may also run counter to the objectives of section 1 ITG, see explanatory notes on ITG 2021, p. 103. Insofar as the decision requires a balancing of various objectives of section 1 (e.g. between the function of channeling into a less dangerous legal market and the necessary degree of combating gaming addiction), the authority has a margin of discression.
Game permissions within the meaning of section 22a paragraph 1 ITG are “related licenses [to the operator license]”, cf. section 9a paragraph 1 number 3 and are therefore only valid in conjunction with an operator license pursuant to section 4 paragraph 1 sentence 1 ITG. This regulatory technique simultaneously limits individual gaming licenses to the period of validity of the operator license.
Operators must therefore not only apply for permission to operate virtual slot machines on the internet, but also apply individually for permission to offer a specific individual slot machine game in accordance with section 22a paragraph 1 ITG. This is already the first major system error of the new regulation on virtual slot machines. In the application and licensing procedure, section 22a ITG leaves out the game creators, the developer studios. It is not taken into account that it is not the operators but the developer studios who determine the design of the slot games. The games are then made available to the operators on a contractual level to be made accessible on their websites. Because of these circumstances alone, it only makes sense to centralize the licensing procedure of individual slot games with the developer studios. However, the regulators have not made use of this. Instead, an application must be made by each operator,, even if it is for the same game in the identical software version or development stage. A situation that provokes legal problems, as will be shown below.
What are the consequences of offering without an individual license pursuant to section 22a paragraph 1 sentence 2 ITG?
Section 22a paragraph 1 sentence 6 ITG clarifies that virtual slot machine games without individual approval are always unauthorised games of chance, even if they are offered by a holder of an operator license for virtual slot machine games pursuant to section 4 paragraph 4. Unauthorised slot machine games within this meaning are also those for which a license was originally granted, but which have been subject to significant changes without prior approval in accordance with Section 22a paragraph 1 sentence 4 ITG, cf. explanatory notes on the Interstate Treaty on Gaming 2021, p. 103. Assuming the applicability of German criminal law, this can lead to criminal liability for the operator, more precisely its responsible representatives in accordance with section 284 paragraph 1 StGB (German Criminal Code). From a regulatory point of view, there is a risk for the extended reliability according to section 4a paragraph 1 number 1 lit. d) ITG. However, in cases where a licensed operator offers slot machine games that are not covered by a license pursuant to section 22a paragraph 1 sentence 2 ITG, a revocation of the organiser’s license under general administrative law provisions would only be possible if the public interest would be endangered without the revocation, section 4d paragraph 4 sentences 2 - 4 ITG in conjunction with section 49 paragraph 2 sentence 3 number 3 VwVfG (German Administrative Procedure Act).
Process of game approvals so far
Shortly after the ITG 2021 came into force, the Saxony-Anhalt State Administration Office, which was competent at the time, published a leaflet on how to apply for individual virtual slot machine games. This leaflet has since been adapted and is also available on the website of the now competent Joint Gaming Authority of the Federal States. Therein, the licensing authority defines the application procedure and requires three steps:
- A written application (additionally in digital form) with the submission of a list of games in a CSV file;
- The creation of a user account for the website of the gaming offer, with which the authority can check each game - the corresponding access data must also be submitted;
- Another listing of the games with various information from the developer studio. The games are to be divided into groups of 20 for the purpose of prioritisation.
In 2022, not only the first operator licenses but also the first individual licenses according to section 22a paragraph 1 ITG were granted on the basis of the application procedure described above. The number of approved games remained far behind the expectations of the industry. On a regular basis, operators apply for a four digit catalogue of virtual slot games, which often corresponds to the past product portfolio. The single game licenses issued in 2022, however, only contained roughly 200 - 300 games. The licenses were also issued under conditions that differed not only in terms of content, but also with regard to the deadline set for the individual developer studios. In particular, in the event of non-implementation of the conditions, the game licenses contain a reservation of revocation within the meaning of section 49 paragraph 2 number 1 VwVfG. For the implementation of the requirements, the Joint Gaming Authority of the Federal States published “Notes on the Interpretation of the Interstate Treaty on Gaming 2021 with regard to Individual Virtual Machine Games”, a catalogue which was intended to concretise the “basic” requirements. Individual virtual slot machine games would have to fulfil the listed requirements in order to be eligible for an approval for operators of virtual slot machine games in Germany; the list would only exemplify the minimum requirements. The instructions concern, among other things, the display of the maximum win probability, the handling of risk games and the design of the rules of the game.
For games which, in the opinion of the supervisory authority, do not meet these requirements even after expiry of the respective deadline set for the implementation of the requirements, the Joint Gaming Authority of the Federal States has now issued partial revocations of the gaming licenses according to section 22a ITG. At the same time, the authority has continued to issue new gaming licenses according to section 22a paragraph 1 ITG. These do not contain any requirements or conditions now. The result of this is an even more restricted catalogue of games for a few developer studios which, in the opinion of the authority, have fully implemented the requirements of section 22a paragraph 2 to 11 ITG.
Requirements for the application procedure
Specific requirements from section 22a paragraph 1 ITG
It is characteristic of application procedures under section 22a paragraph 1 ITG that, as already shown above, they can only be initiated by operators of virtual slot games on the internet themselves. The wording of section 22a paragraph 1 sentence 2 ITG clearly states (“upon their application”) that the application is reserved for holders of a license pursuant to section 4 paragraph 1 sentence 1 ITG. Thus, the manufacturers of the actual software/virtual slot machine games are already not authorised to apply - a birth defect of the regulation, which poses difficulties for the licensing authority and the operator alike. While the licensing authority cannot effectively exchange information with the manufacturers within the framework of an official administrative procedure (the latter can neither be addressees of licensing notices nor hearing procedures within the framework of the license application), the operators themselves have no actual influence on the implementation of (a majority of) the requirements from section 22a ITG. Likewise, they have no influence on the eligibility of the games applied for, but are dependent on the cooperation of the developer studios.
The authority must be provided with a version of the game for the purpose of reviewing the granting of a license. It is noteworthy at this point that the supervisory authority has also made use of the requested test account to check the individual games per operator in every case known here. According to the Joint Gaming Authority of the Federal States, a slot machine game is only to be permitted under the condition that the game has previously been tested at least once per applying operator. Based on the wording of the law, this measure is by no means mandatory. According to section 22a, paragraph 1, sentence 3 ITG, operators are only obliged to make a version of the game available to the authorities for the purpose of reviewing the granting of a license. However, this does not imply an obligation of the authority to examine individual games in the sense of test play. In the licensing procedure, it must be examined whether the virtual slot machine game applied for meets the requirements set forth in section 22a ITG. This does not require that a separate test game be held for each slot game. Virtual slot games are given a unique version number by the developer studios. The same slot game in the unchanged basic version does not require any increased, especially multiple, testing efforts. As a result, a new examination of a virtual slot game by developer X in version Y is unnecessary if the authority had already examined the game in its specific version in a previous application procedure. Instead, a new examination of identical games per operator still takes place.
In this context, the comparison to the licensing procedure of gaming devices according to the Ordinance on Gaming Devices and Other Games with Winning Possibilities (Spielverordnung - SpielV) is also interesting. The requirement to provide the authority with a version of the game for the purpose of reviewing the granting of a license is partly compared with the requirement to submit sample devices according to section 12 paragraph 1 sentence 1 SpielV (Peters, in: Dietlein/Ruttig, sec. 22a ITG, marginal no. 10). In the specific context of online games of chance, the obligation to present devices did not refer to the physical presentation of the device, but to the software underlying the game. Such a reference to section 12 SpielV speaks all the more against the repeated examination of identical game versions of the same developer on the occasion of different applications by the operators. Section 12 SpielV regulates the approval of the abstract design of a gaming device, in the context of which sample devices, but not each individual gaming device, are to be enclosed with the application. Rather, the SpielV provides for the regular inspection of individual gaming devices to ensure that they comply with the approved design (cf. sec. 7 para. 1 SpielV). In the specific online context, however, this would correspond to the approval of a unique technical version of a machine game of manufacturer X with cyclical monitoring of compliance with the requirements at the respective operators. The current verification of each individual game applied for at the respective operator, on the other hand, can neither be mandatorily derived from section 22a paragraph 1 ITG, nor is it practicable.
General principles of the administrative procedure
Principle of equal treatment: It was already stated at the beginning of the article that the operator has a claim to the granting of the game-related license if the licensing requirements for a virtual slot machine game are met. It may therefore sound self-evident that holders of an operator license who have applied for a specific slot machine game in an unique version number can invoke the principle of equal treatment from article 3 paragraph 1 of German Basic Law. Nevertheless, it has already been observed that game versions applied for by several operators were partly permitted, but partly simply not decided, although the application procedures in question ran parallel and were comparable in terms of content (keyword prioritisation). This represents unequal treatment of the operators, which requires a separate justification. However, such a separate justification is not apparent.
Binding to the law: The previous correspondence between the Joint Gaming Authority of the Federal States and the developer studios has also shown that requirements are placed on the games that cannot be derived from the wording of section 22a ITG. This also includes requirements that are no longer covered by any discretionary powers of the administration (which, according to the explanations to section 22a paragraph 1 ITG, only refers to the examination of whether the design of the games is contrary to the objectives of section 1 ITG). Only by way of example, reference is made to the following requirement:
“As a result of a continuous spin, the game could have a length of less than five seconds, which is not allowed. The settings for both spin types are not detectable at 1st game level, nor does holding the spin button for a continuous spin work. This description of the spin types should either be removed from the game rules altogether or a note should be added stating that these settings are not possible in Germany as they are inadmissible.”
This request apparently refers to the average minimum game duration of five seconds stated in section 22a paragraph 6 sentence 1 ITG and the prohibition of an automatic game start in section 22a paragraph 4 sentence 2 ITG. However, the regulations do not specify any minimum content of the game rules, but only with regard to the game features themselves, i.e. the minimum duration and the prohibition of so-called “autoplay”. It is therefore questionable whether such requirements to alter the game rules accordingly have any legal basis in the ITG. This is because requirements for the design of the rules of the game are only contained in section 22a paragraph 3 sentence 2 ITG: the rules of the game and the prize schedule must be easily accessible and described in a way that is easy for the player to understand.
Solution proposals
Legislative adjustment of the application procedure is imperative
In order to effectively solve the problems identified since the beginning of the application procedure for individual gaming permissions, a considerable adjustment of section 22a ITG is required. In the long term, the licensing authority needs a suitable legal basis that also realistically reflects the online gaming market, i.e. in particular recognises developer studios as relevant players and regulatory objects of the ITG. The necessity of such an adjustment should also be in the interest of the licensing authority, as it leads to a considerable simplification of the work of the case handlers.
Of course, legislative action on the part of the state regulators is required to amend the Interstate Treaty due to the legislative competence. The interim report on the evaluation of the Interstate Treaty according to section 32 sentence 2 ITG is a great opportunity to effectively place the necessity of the adjustments with the state legislators. This is to be submitted by 31 December 2023. The aim of the evaluation is to review the achievement of the objectives of section 1 ITG through the regulatory mechanisms of the Interstate Treaty, to identify any undesirable developments and to identify possible need for change to better achieve the objectives. Here, the input of the Joint Gaming Authority of the Federal States will be essential due to its experience with the procedure under section 22a paragraph 1 ITG.
Immediate: More practical approach of the Joint Gaming Authority of the Federal States
The short-term achievement of the channeling goal stipulated in section 1 sentence 1 number 2 ITG is currently not only hampered by the structure of section 22a paragraph 1 ITG. The approach of the licensing authority must also be made more practicable. For example, section 22a paragraph 1 ITG already does not require the testing of each individual slot machine game applied for by each operator before a license is granted. Rather, it would be sufficient to test an applied for slot machine game with a specific version number. In the case of subsequent applications for the same game with an identical version number, the findings of the earlier testing can be used, provided that the applicant declares that no changes have been made to the “basic version”.
The licensing authority is also legally free to publish a list of machine games that it considers permissible (manufacturer/ID/version number). Although this cannot replace the specific application requirement of the individual operators under section 22a paragraph 1 sentence 2 ITG, it can considerably simplify the application procedure. As a non-detrimental administrative act, the publication of a list would also not require a separate legal authorisation. This is due to the fact that the publication of games which, in the opinion of the Joint Gaming Authority of the Federal States, can be licensed does not make any disadvantageous statements about games that are not (yet) included in the list. Already in the current licenses according to section 22a paragraph 1 ITG, the licensing authority emphasises that “insofar as games applied for are not covered by the license, no decision has yet been made on them”.
Developer studios increasingly obliged to work more closely with the Joint Gaming Authority of the Federal States
At the same time, the developer studios can and must also cooperate more closely with the Joint Gaming Authority of the Federal States for the successful design of the application procedures. According to the Joint Gaming Authority of the Federal States, the supervisory authority has increasingly sought direct contact with the game developers in recent months, often without success. This is particularly evident in the fact that several developer studios continue to fail to comply with basic requirements from section 22a ITG. In order to have a chance of success in having their games approved by the Joint Gaming Authority of the Federal States, the manufacturers are also increasingly obliged to seek communication with the authority, to understand its requirements and to implement them in a legally secure manner.
Update of legal note on Loot Boxes product
Santiago Asensi und Carlos Jimenez
Asensi Abogados, S.L.P.
Since the publication of this article, there has not been any further regulatory developments in relation to loot boxes. Currently, there is an internal debate within different departments of the Administration in relation to this matter. It does not seem that those internal discussions are subject to any official agenda or timeframe. Accordingly, it is unknown if the initial Bill will enter into force in January 2024, as it was initially planned.
See the original article „Upcoming regulation on loot boxes in Spain” where the update relates to here: https://asensi.es/upcoming-regulation-on-loot-boxes-in-spain/
Gaming law assessment of Lootboxes in Austria
Dr. Rapani und Mag. Kotanko
Austrian law firm Rapani
Dr. Christian Rapani founded his law firm focusing on corporate and company law in Graz in 2013. Dr. Christian Rapani is the author of numerous publications in these areas of practice. He has extensive experience advising national and international clients in all areas of business law.
Julia Kotanko is an associate with a large certificate of legitimacy. She is continuing her academic career in the context of a doctoral thesis at the Karl-Franzens-University Graz.
Introduction to Lootboxes from the Austrian GamIng Law Perspective
The phenomenon of loot boxes (virtual boxes of loot or treasure in computer or video games) has long been a concept in the online gaming scene. In public perception, the topic of loot boxes has gained importance in recent years, especially due to discussions about gaming elements in online games, which are often used by young people.
In order to assess loot boxes under gaming law, it must first be examined whether loot boxes are to be subsumed under the definition of a game of chance according to section 1 paragraph 1 öGSpG (Austrian Gaming Act), whether it is a game "in which the decision on the outcome of the game depends exclusively or predominantly on chance".
Loot boxes contain virtual items of varying quality and value that are unknown before they are opened. In most cases, the specific content of a loot box is determined by a random algorithm in the respective game. In principle, the person who opens a loot box has no possibility to influence the game result - i.e. the virtual goods contained in the loot box - through his or her skills. In such cases, the analysis leads to the conclusion that such boxes of this kind are to be qualified as games of chance within the meaning of section 1 paragraph 1 öGSpG. At this point, however, it should be noted that the assessment of the predominance of randomness must focus on the specific individual case and the actual modalities of the respective loot box.
Starting from the assumption that it was determined in the first step of the examination that the generation of contents of a loot box depends at least predominantly on chance and therefore constitutes a game of chance, the next step is to examine whether it is also a play out within the meaning of section 2 paragraph 1 öGSpG, since games of chance that are not carried out in the form of a play out are not subject to the gaming monopoly pursuant to section 4 paragraph 1 number 1 öGSpG.
Play outs are games of chance:
- which an entrepreneur hosts, organises, offers or makes accessible; and
- where players or others make a pecuniary contribution in connection with the participation in gaming (stake); and
- where a pecuniary benefit is promised by the entrepreneur, players or others (profit).
In the majority of cases, the first element of entrepreneurial organisation, offer or access will be fulfilled, which is why it will not be discussed in more detail here.
In order to answer the question of whether a stake is given to open the loot box, it is necessary to consider the way in which the loot box can be opened. If the payment of real money is required in order to do so, the existence of a stake is to be assumed in any case. Constellations in which the possibility of opening a loot box is "played for" in the game or in which, for example, an advertising video must be viewed in advance are more critical.
When assessing the prospect of a prize, it must be examined in particular whether a common value can be attributed to the virtual objects contained in the loot box. In this context, the primary focus is on whether the contents of the specific loot box can (also) be used outside of the computer game and have a common value outside of the game. In this context, "marketplaces" on which the virtual goods contained in the loot boxes can be traded are particularly relevant. If marketplaces are given, the existence of a fair market value and thus the prospect of a profit must generally be affirmed.
If all elements are cumulatively present in a specific individual case, the specific loot box is to be qualified as a game of chance. The existence of a game of chance means that this loot box is subject to the gaming monopoly of the federal government in Austria pursuant to section 3 öGSpG and may not be offered in Austria without an Austrian license. In case the loot box can nevertheless be opened from Austria, players can reclaim their net gaming losses under civil law.
On the case law
To the authors' knowledge, at the time of publication of this article, there was no published case law[1] regarding loot boxes in Austria.
From media reports, however, a decision of the district court of Hermagor of 26 February 2023, which is not yet legally binding, is known, in which the loot box subject to the proceedings was qualified as gaming.[2]
This specific individual case concerned a player's claim against Sony Interactive Entertainment Network Europe Limited for a refund of real money paid for the purchase of FIFA packs.
In its ruling, the court assumes that it depends on computer generated chance which virtual goods (in this case virtual football players) are contained in the loot box, which is why the FIFA packs were to be qualified as gaming.
Regarding the question of qualification as a game of chance, the court of first instance, in a first step, assessed as an entrepreneur the party that "grants players the access rights to the digital content that is unlocked by opening the loot box". Since Sony Interactive Entertainment Network Europe Limited offered FIFA points for sale against real money in its PS Store and their only purpose was ultimately to open FIFA packs, Sony Interactive Entertainment Network Europe Limited was the entrepreneur who made the game of chance accessible to the players.
The question of the stake was quickly answered by the court, against the background of the acquisition of the FIFA points through real money.
The court of first instance then dealt with the question of whether the stake was offset by a profit, whereby it focused on "whether the content of the FIFA packs is tradable as an economic good in the ordinary course of business and thus whether it is possible to make a profit". Legally, the court considered that - despite the prohibition to this effect contained in the terms of use - there is nevertheless an actual market that is used by game participants to trade in the virtual football players, which is why the "digital contents of the FIFA packs [...] have an economic value". The court of first instance considered the fact that Sony Interactive Entertainment Network Europe Limited does not offer the prospect of winning the prize itself to be irrelevant, "since according to the wording of the law it is also sufficient if someone else does so".
Since the court ruled that the loot box (FIFA packs) in question constituted gaming for which there was no license under the Austrian Gaming Act, the contracts concluded between the parties were deemed null and void, which is why the "claim was granted to the extent of the amount actually used for FIFA packs". However, "in the course of the reversal, the player has to hand over the contents acquired with the FIFA points".
Conclusion
As far as it can be seen, the proceedings at the Hermagor district court were conducted with the support of a legal cost financier, which is why it can be assumed that further legal disputes in this context are imminent.
The case law in this regard - including that of the second instance in the proceedings discussed here - will have to be followed closely by all stakeholders. From the authors' point of view, the present judgement already offers weighty reasons to question the legal assessment made there.
The analysis of the constituent elements of the Gaming Act, which must be fulfilled in order to speak of a prohibited game of chance, i.e. "illegal gaming", and the recitals of the court of first instance suggest that a corresponding adjustment of the gaming conditions can provide a remedy for the future. A design outside the scope of application of the Gaming Act requires an evaluation of the respective product and individual approaches to a solution.
[1] https://www.ris.bka.gv.at/Judikatur/.
[2] cf. https://www.ots.at/presseaussendung/OTS_20230303_OTS0056/sensationsurteil-lootboxen-sind-illegales-gluecksspiel.
Lootbox judgement from Austria - Game over for FIFA Packs also in Germany?
Dr. Wulf Hambach und Dr. Stefan Bolay
Hambach & Hambach Lawyers
For more than 15 years, we have been advising domestic and foreign companies along the entire value chain of the gaming industry. Our many years of work at the highest level have earned us the reputation of being one of the world's leading law firms in this area. For example, we obtained the "Carmen Media" decision (Case C46/08) before the European Court of Justice, as a result of which gambling law in Germany had to be revised. We also advise governments on reforming online gambling laws. For example, the EU Commission commissioned us to modernize the gambling legislation of an Eastern European country in light of European law.
Lootbox judgement from Austria - Game over for FIFA Packs also in Germany?
As described by our Austrian colleagues from the law firm RAPANI, the District Court of Hermagor/Austria has classified Lootboxes in the form of so-called "FIFA Packs" from the FIFA video games as games of chance, which violate the Austrian gambling monopoly (judgment of February 26, 2023). Therefore, Sony (Interactive) was ordered to repay the purchase prices that a customer had paid for such packs. The court reasoned as follows: The specific content of the FIFA pack purchased depended on chance and could constitute a prize in the sense of a "pecuniary benefit" as defined by the Austrian Gaming Act.
Impact on Germany from the perspective of the claimant side
Austrian litigation funding institution “Padronus” has not only financed numerous lawsuits from the online casino sector, but has now also dedicated itself to player lawsuits in the area of lootboxes and was involved in the above-mentioned case. Padronus CEO Eibl recently also commented on the legal situation in Germany to the “Behoerden Spiegel”, a monthly national newspaper for the public sector in Germany (see: https://www.gluecksspielwesen.de/2023/04/14/lootboxen-gerichtsurteil-in-oesterreich-auch-meilenstein-und-praezedenzfall-fuer-deutschland/):
“On the question of the legality of Lootboxes, the legal situation in Germany is very similar, if not identical, to the legal situation in Austria. (...) In Germany, (...) the same subsumption rules exist, namely the randomness of the outcome and the "acquisition of a chance to win", whereby a "win" is only possible if the consideration received has an economic value that can be assessed as either a profit or a loss. Therefore, the Austrian court ruling can also be seen as a milestone and precedent for German case law.”
But is the legal situation really as clear as the Austrian litigation funder sees it?
Situation in Germany
From a German perspective, too, the random nature with regard to the content of Lootboxes is indeed undisputed. But: What is exciting, is the question of whether there really is "a game" in which "a fee is demanded for the acquisition of a chance to win", as the German State Treaty on Gambling stipulates.
The FIFA packs are "virtual items" that are basically intended to be used for the game. They can also increase the chances of winning "in the game", but no prizes such as prize money are offered for the "winners" of the FIFA video games. In this respect, at most the "buying of the Lootboxes" as such can be a game of chance (“within the FIFA game”).
However, then the content of the FIFA packs would have to represent an economic value "outside" the FIFA game. Here, the Austrian court argued as follows: Since the digital soccer stars from the FIFA packs would be traded on a secondary market on the internet, it would be possible to make a profit outside the game, because significantly higher "profits" could be made for individual packs than the original purchase price.
In this case, though, the trade would also have to be attributable to Sony, they would have to be somehow legally co-responsible for the trade. Against this, one can object that the game providers prohibit this trade in their general terms and conditions. However, on the other hand, the game providers also "profit" from this trade, as it can strengthen the economic value of the Lootboxes and thus also promotes the sale of Lootboxes by the game providers.
Ultimately, the existence of a chance to win and thus a game of chance in connection with the acquisition of a Lootbox such as FIFA packs is to be negated the more the game providers are economically and organisationally distant from possibly emerging secondary markets or the more the game providers seek to prevent secondary markets.
This is because, according to German law and case law (instructive: BVerwG 8 C 21.12 - judgment of October 16, 2013, "Super-Manager"), a "direct connection" between the payment of a fee and the acquisition of a chance of winning is required in order to affirm a game of chance. This immediate connection is questionable, since the economic "profit" from the Lootbox purchase - if any - can only be realised later on the secondary market (“no temporal directness”) and the profit claim cannot be asserted against the game provider either (“no economic directness”).
Outlook
What happens next? In order to prevent a wave of lawsuits in the matter of Lootboxes in Germany, a new co-regulatory framework for online games and lootboxes in particular and to be developed.
But how?
Since the EU Commission was recently called upon to develop new rules for Lootboxes at the EU level, this initiative will also soon have an impact on Germany, among other things via changes to the Interstate Treaty on Media and the respective docked youth protection laws. Since, according to MEP Adriana Maldonado López, the main aim here is to protect children and young people from potentially addictive content, uniform verifiable rules will be established for (online) sales (see also TLN 1/2022 article “Netherlands court sets new standards for gambling law assessment of lootboxes”)
Here, a generally recognised test seal, such as a specially tailored TÜV seal, could provide additional security for end consumers, the control authorities and the providers. Since clear age labels should also indicate which game content may be provided for which age group, the Voluntary Self-Regulation of the Entertainment Industry (Entertainment Software Self-Regulation/USK) will continue to play a central role in ensuring a high level of protection for the respective online player groups in Germany.
During a regulatory webinar, organised by Behörden Spiegel/Glücksspielwesen (https://www.gluecksspielwesen.de/termine/), focusing on lootboxes in Germany, Fabian Gramling (Member of the Federal Parliament of Germany and deputy member of Consumer Protection) highlighted on 24 April 2023 the need for a co-regulatory solution involving the USK and the online games industry. He said that “the young games industry should not be crushed by new regulatory pressure and bans but need to provide the game industry with a clear perspective, how youth protection and self-regulation can best be achieved – based on studies also involving law experts from the industry and the political level”.
Finally: The political discussion on lootboxes is now really kicking off in Germany. However, to copy a court decision from Austria or from Belgium to path the way for a lootboxes ban is too short thinking and is also not shared by a wider political consent. Finally new stricter rules in a trustable legal co-regulatory framework seems to be the silver bullet to success for the future regulation of Online Games and Lootboxes in Germany.
Awards for Hambach & Hambach in 2023
We are pleased to announce that our founding partners, Dr. Wulf Hambach and Claus Hambach LL. M., have once again received multiple awards at the highest level for 2023.
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Legal 500 Country Comparative Guide on Gambling law
Hambach & Hambach, alongside law firms such as Harris Hagen and Herzog Fox & Neeman, is responsible for writing a contribution to the Legal 500 Country Comparative Guide on Gambling Law. The guide aims to provide its readers with a pragmatic overview of the law and practice of gambling across a variety of jurisdictions.
Each chapter of the comparative guide on gambling law provides information about the current issues affecting gambling law in a particular country and addresses topics such as legal definitions, regulatory bodies, licenses, advertising, and tax rates as well as personal insight and opinion as to the future of the gaming market over the next five years.
The Q&A for Germany has been provided by Dr. Wulf Hambach, Claus Hambach, LL.M., Yannick Skulski and Phillip Beumer. You can find it here: https://www.legal500.com/guides/chapter/germany-gambling-law/
