To prevent fraud and deception in network recreational games.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Consumer Protection for On-Line 
Games Act''.

SEC. 2. FEDERAL TRADE COMMISSION RULES REQUIRED.

    (a) In General.--The Commission shall prescribe rules in accordance 
with this section to prohibit unfair and deceptive acts and practices 
in the labeling and advertising of games of chance and games of skill 
offered by means of the communications networks by network game 
operators. Such rules shall--
            (1) prohibit network game operators from making false, 
        nonsubstantiated, nonverifiable, or misleading claims 
        regarding--
                    (A) the fairness of any specific such game of 
                chance or game of skill, or combination thereof played 
                by the consumer;
                    (B) whether the game offered is a game of skill or 
                a game of chance, or a combination thereof; and
                    (C) if the game offered is a game of chance, or a 
                combination of skill and chance, whether all 
                participants (including the game operator) are accorded 
                equal or unequal chance;
            (2) prohibit such operators from displaying or advertising 
        any seal or insignia attesting to the fairness of any game of 
        chance or game of skill, or other matters described in 
        paragraph (1), unless such seal or insignia has been awarded by 
        a self-regulatory organization that complies with section 4.
    (b) Evasions.--The rules issued by the Commission under this 
section shall include provisions to prohibit unfair or deceptive acts 
or practices that evade such rules or undermine the rights provided to 
customers under this Act.

SEC. 4. ROLE OF SELF-REGULATORY ORGANIZATIONS.

    For purposes of section 3(a)(2), a self-regulatory organization 
does not comply with the requirements of this section unless--
            (1) the self-regulatory organization is registered with the 
        Commission, by filing with the Commission an application for 
        registration that--
                    (A) is in such form as the Commission, by rule, may 
                prescribe;
                    (B) contains the rules of the self-regulatory 
                organization and such other information and documents 
                as the Commission, by rule, may prescribe as necessary 
                or appropriate;
            (2) the Commission determines that--
                    (A) such self-regulatory organization is so 
                organized and has the capacity to be able to carry out 
                the purposes of this Act and to comply, and to enforce 
                compliance by its members, with the provisions of this 
                Act, the rules thereunder, and the rules of the self-
                regulatory organization;
                    (B) the rules of the self-regulatory organization 
                are designed to prevent fraudulent and deceptive acts 
                and practices, and, in general, to protect consumers 
                and the public interest;
                    (C) the rules of the self-regulatory organization 
                provide that its members shall be appropriately 
                disciplined for violation of the provisions of this 
                Act, the rules thereunder, or the rules of the self-
                regulatory organization, by expulsion, revocation of 
                the authority to display or advertise any seal or 
                insignia, or any other fitting sanction; and
                    (D) the rules of the self-regulatory organization 
                provide a fair procedure for the disciplining of 
                members; and
            (3) the Commission has not revoked or suspended the 
        Commission's determination under paragraph (2) with respect to 
        such self-regulatory organization.

SEC. 5. ACTIONS BY STATES.

    (a) In General.--Whenever an attorney general of any State has 
reason to believe that the interests of the residents of that State 
have been or are being threatened or adversely affected because any 
person has engaged or is engaging in a pattern or practice which 
violates any rule of the Commission under section 3(a), the State may 
bring a civil action on behalf of its residents in an appropriate 
district court of the United States to enjoin such pattern or practice, 
to enforce compliance with such rule of the Commission, to obtain 
damages on behalf of their residents, or to obtain such further and 
other relief as the court may deem appropriate.
    (b) Notice.--The State shall serve prior written notice of any 
civil action under subsection (a) upon the Commission and provide the 
Commission with a copy of its complaint, except that if it is not 
feasible for the State to provide such prior notice, the State shall 
serve such notice immediately upon instituting such action. Upon 
receiving a notice respecting a civil action, the Commission shall have 
the right (1) to intervene in such action, (2) upon so intervening, to 
be heard on all matters arising therein, and (3) to file petitions for 
appeal.
    (c) Venue.--Any civil action brought under this section in a 
district court of the United States may be brought in the district 
wherein the defendant is found or is an inhabitant or transacts 
business or wherein the violation occurred or is occurring, and process 
in such cases  may be served in any district in which the defendant is 
an inhabitant or wherever the defendant may be found.
    (d) Investigatory Powers.--For purposes of bringing any civil 
action under this section, nothing in this Act shall prevent the 
attorney general from exercising the powers conferred on the attorney 
general by the laws of such State to conduct investigations or to 
administer oaths or affirmations or to compel the attendance of 
witnesses or the production of documentary and other evidence.
    (e) Effect on State Court Proceedings.--Nothing contained in this 
section shall prohibit an authorized State official from proceeding in 
State court on the basis of an alleged violation of any general civil 
or criminal antifraud statute of such State.
    (f) Limitation.--Whenever the Commission has instituted a civil 
action for violation of any rule or regulation under this Act, no State 
may, during the pendency of such action instituted by the Commission, 
subsequently institute a civil action against any defendant named in 
the Commission's complaint for violation of any rule as alleged in the 
Commission's complaint.
    (g) Actions by Other State Officials.--
            (1) Nothing contained in this section shall prohibit an 
        authorized State official from proceeding in State court on the 
        basis of an alleged violation of any general civil or criminal 
        statute of such State.
            (2) In addition to actions brought by an attorney general 
        of a State under subsection (a), such an action may be brought 
        by officers of such State who are authorized by the State to 
        bring actions in such State for protection of consumers and who 
        are designated by the Commission to bring an action under 
        subsection (a) against persons that the Commission has 
        determined have or are engaged in a pattern or practice which 
        violates a rule of the Commission under section 3(a).

SEC. 6. ADMINISTRATION AND APPLICABILITY.

    (a) In General.--Except as otherwise provided in section 5, this 
Act shall be enforced by the Commission under the Federal Trade 
Commission Act (15 U.S.C. 41 et seq.). Consequently, no activity which 
is outside the jurisdiction of that Act shall be affected by this Act, 
except for purposes of this Act.
    (b) Rulemaking.--The Commission shall prescribe the rules under 
section 3(a) within 270 days after the date of enactment of this Act. A 
rule issued under this subsection shall be treated as a rule issued 
under section 18(a)(1)(B) of the Federal Trade Commission Act (15 
U.S.C. 57a(a)(1)(B)).
    (c) Enforcement.--Any violation of any rule prescribed under 
subsection (a) shall be treated as a violation of a rule respecting 
unfair or deceptive acts or practices under section 5 of the Federal 
Trade Commission Act (15 U.S.C. 45). Notwithstanding section 5(a)(2) of 
such Act (15 U.S.C. 45(a)(2)), communications common carriers shall be 
subject to the jurisdiction of the Commission for purposes of this Act.
    (d) Actions by the Commission.--The Commission shall prevent any 
person from violating a rule of the Commission under section 3 in the 
same manner, by the same means, and with the same jurisdiction, powers, 
and duties as though all applicable terms and provisions of the Federal 
Trade Commission Act (15 U.S.C. 41 et seq.) were incorporated into and 
made a part of this Act. Any person who violates such rule shall be 
subject to the penalties and entitled to the privileges and immunities 
provided in the Federal Trade Commission Act in the same manner, by the 
same means, and with the same jurisdiction, power, and duties as though 
all applicable terms and provisions of the Federal Trade Commission Act 
were incorporated into and made a part of this Act.

SEC. 7. DEFINITIONS.

    As used in this Act:
            (1) Commission.--The term ``Commission'' means the Federal 
        Trade Commission.
            (2) Network game operator.--The term ``network game 
        operator'' means a public or private business enterprise that 
        engages in the business of providing game playing services (as 
        opposed to the sale or download of a game as a publisher or 
        distributor), either for a fee or for free, using a 
        communication path between the player and the game operator 
        that is part of a communications network.
            (3) Communications network.--The term ``communications 
        network'' means a public or private communication system that 
        is used for the exchange of information or participation in 
        transactions (or both) and includes systems such as the 
        telephone system, cable systems, satellite systems, wireless 
        systems, or the Internet.
            (4) Game of skill.--The term ``game of skill'' means a game 
        in which there are few or no independent chance elements (such 
        as die rolls, spinning wheels, drawn cards, or other random 
        event generators) that substantially affect a game's outcome 
        beyond the control of one or more of the players.

Summary: Consumer Protection for On-Line Games Act - Directs the Federal Trade Commission (FTC) to prescribe rules to prohibit unfair and deceptive acts and practices in the labeling and advertising of games of chance and games of skill offered by means of the communications networks by network game operators. Requires that such rules prohibit: (1) making false, unsubstantiated, non-verifiable, or misleading claims regarding the fairness of the game. (2) displaying or advertising any seal or insignia attesting to the fairness of any game of chance or skill unless such seal or insignia has been awarded by a self-regulatory organization that complies with this Act. And (3) unfair or deceptive acts or practices that evade such rules or undermine customer rights. Requires a self-regulatory organization, to be in compliance, to: (1) be able to enforce compliance by its members. And (2) have rules designed to prevent fraudulent and deceptive acts and practices, to protect consumers and the public interest, and to discipline violating members. Authorizes State attorneys general to bring civil actions on behalf of residents in US district court to enjoin a pattern or practice which violates such FTC rules.