Problems with Self-Regulation and Government Regulation in the Gaming Industry

For several months now, the domestic gaming industry has been experiencing a serious conflict between producers and consumers. The most recent—and also one of the most controversial—cases is the issue of randomized items in MapleStory, published by Nexon, Korea’s No. 1 game company. Among Korean-made games, MapleStory has long been notorious, along with Lineage and FIFA Online, for having especially strong gambling-like elements. Users became enraged when it was revealed that the probability assignment for “additional options,” regarded as the most basic condition for strengthening items in the game, was not completely random but instead determined according to a preset logic. Many users had invested enormous amounts of cash over the years because of these “additional options.” (In the author’s personal view, it does not seem that Nexon deliberately manipulated the assignment of additional options, though this is not certain.)

MapleStory users confronted management by protesting in front of Nexon’s headquarters and by contacting members of the National Assembly and the media to publicize the issue. If people dislike a company’s operating policies, it is entirely legitimate to demand improvements through methods such as a boycott. The problem, however, is that many users are not stopping at a simple boycott of the company but are strongly calling for state intervention.

On “MapleStory Inven,” which largely leads user opinion among MapleStory players, the general sentiment is roughly as follows. At present, randomized items in the gaming industry are subject to little meaningful government regulation and largely rely on the industry’s voluntary self-regulation. Even if Nexon resolves the present controversy, they argue, such incidents could happen again and consumers cannot truly be protected unless there is legal regulation or oversight by the state from the outset. Korean game companies, they say, will do nothing but exploit consumers unless they are managed and supervised by the government, and therefore the gaming industry must be controlled at the national level.

From a libertarian perspective, their argument suffers from the serious problem of falling into a typical statist fallacy. Sound economics teaches us a truth: state intervention never truly solves problems. It either makes them worse, or merely dresses things up to look as though the problem has been solved while creating even more problems.

Today’s randomized items are not something game companies unilaterally force upon consumers. Unlike state institutions, market institutions are not coercive. If we fail to pay our taxes to the state or fulfill our military service obligations, we can be imprisoned. But even if catching stronger boss monsters in MapleStory effectively requires spending 500,000 won in cash, the game company is not threatening to send us to prison if we do not hand over that 500,000 won. Users can always decide to quit MapleStory, play another game, or not play games at all. Users chose for themselves to use MapleStory’s randomized items. In other words, if users do not buy them, the game company cannot sell them. In this sense, randomized items established in the market are part of an order jointly formed by consumers and suppliers. When the state intervenes in a voluntarily formed market order, it disrupts this balance and produces side effects.

If gamers truly reject randomized items, they should boycott games that sell them or use their own property to actively express their views to companies, moving in the direction of strengthening self-regulation. In fact, many games earn substantial profits without relying on randomized items. On the contrary, some games that depend excessively on randomized items have drawn intense criticism from gamers and are now facing major difficulties in generating profits going forward. Randomized items are not an evil practice that will never disappear unless the government directly regulates them. In order to sustain their business in the long term, game companies have no choice but to reflect consumer signals, and if they recognize that consumers sincerely oppose randomized items, they will find appropriate alternative ways to generate profits. MapleStory itself, despite causing controversy, has reflected consumer opinion voluntarily—even without government regulation—by apologizing to consumers, presenting a compensation plan, and disclosing the logic behind its existing randomized items.

Some may ask, then, how one can respond if a game company cheats consumers through randomized items. For example, if disclosure of item probabilities is not legally mandated, a game company may be able to “manipulate” those probabilities to maximize profit. But if the probabilities are legally disclosed, such manipulation could be prevented, and even if manipulation did occur, legal punishment would be possible.

It is more appropriate to view the disclosure of randomized item probabilities, and the problem of probability manipulation, as matters of ethics rather than economics. Libertarian ethics says that the state should not intervene in either case. More precisely, in the case of probability disclosure, it is the game company’s right, so the state cannot interfere. Consumers should strongly demand that game companies disclose probabilities voluntarily. In the case of probability manipulation, it is certainly subject to legal punishment because it constitutes fraud. However, it is unjust to control the possibility in advance before an actual crime has occurred. This is the same reason anti-terrorism laws or the National Security Act are unjust. Requiring probability disclosure might make it easier to identify a company’s probability manipulation, but that is no different in logic from saying that if the state controlled every citizen’s personal information, it could catch terrorists more easily. In both cases, individual rights are violated, and so they can never be accepted, however desirable the goal may seem.

The market may not always solve problems immediately or with certainty. It will probably take considerable time to overturn an already established order. Government intervention may appear efficient because it seems to produce large effects in the short term. The key point, however, is that such intervention is not only ineffective in the long run but actually worsens the problem. If a solution is imposed by force before companies and consumers can interact and discover an arrangement that satisfies everyone, then the best possible solution that might have emerged will disappear.

In the past, the gaming industry saw game companies and gamers fighting together against government regulation. Today, however, things are different. This is a matter in which game companies can be said to have misjudged gamers’ needs. Game companies must accurately recognize their own mistakes and strive to meet consumers’ genuine and urgent needs.

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Original title: 게임업계의 자율규제와 국가규제의 문제

Author: Kyeong-hoon Kim

Date: 2021-03-25

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=free_opinion&pn=11&idx=23586