Japan: The illegality of 'Complete Gacha' | world online gambling law report | the newsletter for the online gambling and gaming industry

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Volume: 11 Issue: 10(October 2012)
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Keywords:
japan illegality complete
gacha surprise rulingjapans consumer affairs
agency declared certainsocial games illegal chiekasahara daniel

Jurisdictions:Japan Tokyo US

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Japan: The illegality of 'Complete Gacha'
In a surprise ruling, Japan’s Consumer Affairs Agency has declaredcertain social games to be illegal. Chie Kasahara and Daniel
Hounslow of Atsumi & Sakai, Tokyo, discuss how concerns about aspecific system, based on toy vending machines, has led toincreased regulation of Japan’s social gaming industry.

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Social gaming through the internet has been popular in Japan since 2008, whenGree, one of the most famous social gaming platforms in Japan, began TV
advertising targeting mobile phone users. Since then the social gaming industry inJapan has grown rapidly and was estimated by Mitsubishi UFJ Morgan Stanley tohave been worth JPY 265.8 billion (JPY 265,800,000,000) in 2011, and it is expectedthat the value of social gaming will exceed that of the video games industry in 2012.
Users aged from upper teens to senior citizens engage in social gaming using mobilephones and/or smartphones. Initially the games are free, but many users purchasevirtual items such as weapons for combat games, special feeds for fishing games,
and accessories for avatars in communication games, etc. using virtual money whichis then charged to the user in real money as a communication service fee for themobile phone or smartphone, and paid through a credit card or by a pre-paid card.
Whilst social games are also played on PCs, and some kinds of games, such associal communication games (e.g. Second Life, etc.) are more suited to PCs thanmobile phones, the number of users and hours used for gaming on mobile phones
and/or smartphones is reported to far outstrip that for PCs, with users playing mobile
social games to kill time when commuting, for example.
Rising charges for the purchase of such virtual items for social games and theexchange of such virtual assets for real money has been giving rise to issues,
especially for younger people, while complaints to consumer affairs bureaus havebeen increasing.
Although gambling is heavily regulated n Japan, the law has not caught up with social
gaming and there is no specific law in Japan governing social gaming, unlike forexample, Pachinko (a pinball game in Japan, which was a 21.065 billion(21,065,000,000,000) yen industry in 2009), which is governed by the Act on Control
and Improvement of Amusement Businesses.
Whilst the social game industry has had a good record with users and not attracted
the attention of regulators, the Consumer Affairs Agency (the Agency) announced inMay 2012 that it regards one of the popular forms methods of social gaming as illegal.
This news hit the value of shares of the leading social gaming providers hard; Greeand DeNA (both of which are listed on the Tokyo Stock Exchange) lost an aggregateof over JPY 200,000,000,000 on their share prices.
The controversial type of social game in question is based on method, ‘Complete
Gacha', is one of the ‘Gacha’ systems, which are named after the ‘Gacha Gacha’ toyvending machine, a kind of lucky dip machine targeting children, where for a few
hundred yen (a few dollars) the user can buy a capsule including a toy which cannot
be chosen when making the purchase. Social game operators adopted a virtual‘Gacha Gacha’ system on social games to provide rare items for users. If a userpays, say, 200 to 300 yen value as virtual money on the ‘Gacha Gacha’ system, then,like the physical ‘Gacha Gacha’ the system provides an item which cannot be chosen
by the purchaser/user. If a game user then collects a certain set of items, e.g. theuser ‘buys’ random virtual cards and gets a straight flush in a poker game, the gamesoftware provides the user with a rare virtual item or enhanced power which may
benefit the user in playing the social game. This system is called a ‘Complete Gacha’('Comp-Gacha’).
If a social game has a ‘Comp-Gacha’ system, users may purchase many ‘Gachas’until they get the items needed to enable them to obtain a rare virtual item and/or

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enhanced power, and in doing so they will spend virtual money which is then charged
to the user as a communication fee or paid by credit card as real money; it is reported
that some users may commonly spend 100,000 yen (about 1,250 US dollars) or morea month for ‘Gachas’.
In May 2012, the Agency announced that it took the view that the ‘Comp-Gacha’system provides a prize prohibited by the Act against Unjustifiable Premiums andMisleading Representations (the Act). The Act provides that the Fair Trade
Commission may, when it finds it necessary to prevent the unjust inducement ofcustomers, restrict the maximum value of a prize or the total amount of prizes, thekind of prizes, or the method of offering of a prize, or any other matter relating
thereto, or may prohibit the offering of a prize. In addition, a public notice issued in1977 (public notice in relation to limitation of premiums and prizes) prohibits thecombination of cards/items as a prize as it tends to be deceptive or fraudulent and be
easily used to induce children to develop a passion for gambling.
The Agency takes the view that if a rare item (i.e. a rare virtual asset or power) is
provided by a social game operator through the ‘Comp-Gacha’ system after the userpurchases gains other items through purchasing many ‘Gachas’, the ‘Comp-Gacha’system is a means to entice the gamer to purchase ‘Gachas’, and that the item orpower consequently obtained is regarded as a prize prohibited by the Act.
However, the Agency’s announcement does not have the force of law, and to datethere is no regulation or guideline in force in relation to ‘Comp-Gachas’, though theAgency is planning to introduce a standard and is currently conducting publicconsultations.
In the meantime, in March 2012 six leading platform companies (NHN Japan, Gree,
Cyber Agent, DeNA, Dwango and mixi) established a liaison council to promote thesafety of the social gaming industry and to protect young gamers. In July 2012 thecouncil announced voluntary ‘Gacha’ guidelines effective from 1st July 2012, as well
as real money trade guidelines and guidelines for providing an in-game explanations,with the aim of making clear in games a of the game’s systems (including ‘Gachas’) inorder to prevent users from being mislead. In addition, many platform companies
have ceased to use the ‘Comp-Gacha’ system or are planning to cease using it.
The Agency’s sudden announcement has disrupted the development of the social
gaming industry. However, the need for regulation of this industry has finally beenrecognised and the implementation of regulations should promote a healthy
improvement in social gaming. Two months from the surprise announcement by theAgency, the industry seems to be recovering its composure and the social gaming
market continuing its rapid growth.
Chie Kasahara (Bengoshi)
Partner
Daniel Hounslow
Consultant
Atsumi & Sakai, Tokyo
chie.kasahara@aplaw.jp
daniel.hounslow@aplaw.jp

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