Centers of Excellence: video games

While I cannot say that I’m an avid player of Farmville or Mafia Wars, I have noticed that several of my Facebook friends spend hours at work playing these games. What do my friends receive by selling their brothers to a mob family for $1M in Mafia Wars? How do my friends get Farmville badges or ribbons? It appears that the obtaining ribbons and selling your brother comes with a price.

Facebook and Zynga, Inc, producer of “Mafia Wars” and “Farmville,” were sued in Federal court last week for false and deceptive advertising in violation of the California Unfair Competition Law §17200.

The class-action complaint alleges that Facebook and Zynga engaged in a fraudulent scheme to lure users to sign up for services and goods. Although consumers are allowed to play Zynga’s games free of charge, the complaint alleges that the games are designed to allow players to earn “virtual currency,” to purchase online goods, unlock new levels of the game, or otherwise make the games more enjoyable. Although “virtual currency” can be obtained by playing these games, Zynga also allegedly permits consumers to purchase “virtual currency” by participating in “special offers” made available to users.

For example, one offer allows consumers to participate in an IQ test. To take the test, a consumer must provide his or her cell phone number, and they are allegedly told that the results of the test will be send to them via text message. However, the advertisement allegedly subscribes users to an SMS service that bills consumers on a monthly basis on their cellular phone bill. According to the complaint, users must allegedly go through several steps to unsubscribe for the service and obtain a refund. In this case, the plaintiff was allegedly charged nearly $200 for “a risk-free Green Tea Purity Trial” consisting of a package of 30 green tea pills and three tea bags while playing the game YoVille!

Interestingly, Zynga’s CEO was quoted publicly as stating that “[I] did every horrible thing in the book to just get revenues right away…[by giving my] users poker chips if they downloaded this wiki toolbar…[and] we did anything possible just to get revenues so that we could grow and be a real business.” Facebook’s new policies prohibit online advertisements embedded within computer games that are otherwise permissible on Facebook.

Despite the CEO’s statements and the plaintiff’s misfortunes, Facebook may be able to obtain safe harbor protections under the Communications Decency Act (“CDA”). Facebook may be able to argue that because it did not create the allegedly deceptive ads, it may be deemed an interactive computer service shielded by the CDA safe harbor provision, which states that “no provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.” 47 U.S.C. § 230(c)(1). Facebook’s defense may likely succeed, because Facebook simply permitted the games to appear on its website without engaging in additional activity. Zynga may also claim this defense alleging that they simply provided the forum for the ads to appear. Zynga’s defense would likely turn on whether Zynga created the content, or if it merely provided the forum. Notwithstanding, even if Zynga provided the forum, we would think that the FTC would take a long hard look at someone who knowingly provided the forum for allegedly false and deceptive ads on their video games.

–Jason W. Gordon, Esq.

These materials have been prepared by Winston & Strawn for informational purposes only. These materials do not constitute legal advice and cannot be relied upon by any taxpayer for the purpose of avoiding penalties imposed under the Internal Revenue Code.