[News Focus] Nexon Korea to challenge FTC’s hefty penalty

South Korea’s top game developers including Nexon, and possibly Netmarble Games, are considering challenging the basis of the Fair Trade Commission’s recent decision to impose 1 billion won ($945,200) in penalties and fines for deceiving customers in promoting their randomized in-game items.

The move comes after the Korean FTC penalized three local gamemakers for their deceptive randomized in-game item promotion practices on Sunday.

Nexon Korea was slapped with a 939 million won penalty and a 5.5 million won fine, the biggest among the three, while Netmarble received a 45 million won penalty and 15 million won fine. NextFloor, the maker of “Destiny Child,” received a fine of 5 million won. All three firms were ordered to correct their practices as well.

They marked the highest-ever penalties to be levied on local game companies for violating Korea’s electronic commerce act, and hinted at legal efforts to regulate the sale of “loot boxes” containing randomized in-game rewards, which critics have argued constitutes as gambling. 

In response, Nexon Korea issued a statement saying that it disagrees with the FTC’s interpretation of the wording the company used — “random provision” — to promote the sale of its randomized virtual game items.

“In our puzzle event, we used the phrase ‘random provision’ to suggest the items would be provided at random, and that the odds of obtaining each puzzle piece were different. However, the FTC interpreted the phrase as suggesting equal odds. We plan to work on obtaining an additional review of this issue in the future,” Nexon Korea said in a statement.

The FTC had taken issue with Nexon’s mode of promoting “loot boxes,” which can be purchased at a fixed price with real cash. The items obtainable through a box, including their type, effect and performance are determined randomly after a user buys and opens it.

According to the FTC, Nexon offered such boxes through its “Celebrity Count” event in its game “Sudden Attack.” For every count purchased, each priced at 900 won, the firm would issue two puzzle pieces. Users who collected all 16 pieces would receive diverse benefits in the game.

In promoting the puzzle event, Nexon informed users that the 16 pieces would be provided at random. In reality, however, the odds of obtaining some of the pieces was as low as 0.5 percent. By depriving users of this information, the FTC said the gamemaker led ordinary users to believe that the odds of getting each puzzle piece would be equal.

In one case, a customer spent a whopping 460,000 won for purchasing hundreds of puzzle pieces through the Celebrity Count package, the FTC said.

The fair trade regulator also noted that Nexon did not properly inform customers of their right to withdraw in-game item purchases in its game “Counter Strike Online 2.”

Likewise, Netmarble Games was penalized and fined for deceiving users of its online baseball game “Ma9.” According to the FTC, the firm advertised that the odds of obtaining certain in-game items would be raised by up to 10 percent during an event, when in reality the rate rose by at most 5 percent.

Similarly, Netmarble held an event for its game “Monster Taming” in which users could pay to pick out rare monsters. The firm advertised that the odds of getting an “invincible monster” was under 1 percent, though the odds were in fact as low as 0.0005 percent.

The FTC determined that Netmarble misled users to expect their chances of obtaining the invincible monster was close to 1 percent, encouraging more purchases.

Netmarble was further fined for informing users of “Everybody’s Marble” that they could obtain six special characters only during a certain event period, though the firm continued to sell the same characters through other events.

Netmarble Games said in a statement that it has sent out an apology announcement to the users of the three games problematized by the FTC and made due corrections to its practices.

When asked of potential plans to challenge the FTC’s actions, the company said that it would “review details of the FTC’s decision documents once they arrive, and carefully decide its response.”

NextFloor, a subsidiary of Line Games, was penalized on similar charges of misinforming users of the odds of obtaining certain in-game items as well as advertising recurring events as being a limited-time offer in “Destiny Child.”

The FTC’s actions have signaled alarm across the Korean game sector, as it could hurt the sales of in-game items — particularly randomized items, which users tend to continuously buy until they get a desired result — that contribute immensely to profits.

Governments around the world, including Korea’s, have been facing growing calls to draw up protective measures to shield customers from the gaming industry’s aggressive monetization practices.

A global debate continues over whether loot boxes — virtual boxes containing random in-game items that help you advance in a game, which users can purchase with real money — should be considered as gambling and become a subject of heavy regulation.

By Sohn Ji-young (jys@heralcorp.com)