Korean National Assembly to Outlaw RMT

From correspondent Unggi Yoon and our friends at VERN, we hear that the Korean National Assembly is considering a bill that will impose fines on companies that engage in RMT for business purposes.  Jun-Sok Huhh has the report. Apparently the idea is that individuals can freely buy and sell informally, but if you take it to the business level and set up a gold farm or a business that makes money by reselling, you pay a fine.

In the United States, today is Thanksgiving. We're often asked what we are thankful for. Today, I am thankful for the Korean National Assembly.

Opinion: My oh my is this the right answer. Nobody cares about small-scale gold-trading for convenience - the guy who sells his character's gold to pay for college tuition, the dad who buys a heap of gold once because it's a gear-based leveling game and it would take too much time to get to the fun stuff.  According to the analysis I wrote, gold sales are no problem at low levels. It's when their scale rises that macro-level effects start to be visible, including (what's most important to me) the erosion of fantasy.

I have the sense that gold trading is problematic only when amplified by the efficiencies of business. IGE and the gold farmers have created an entire industry of gold farming, that sets millions of man-hours to work on the gold pumps, day in and day out, enough to destroy what a game is all about. That's got to stop. And this bill will stop it.

Comments

[Daniel Stengel]

1.

I am not sure whether a separate bill is needed, as it may be sufficient to enforce appropriate EULA's. A separate bill means more regulation, something I don't really like; I would prefer a liberal approach. In addition, some virtual worlds may want to have RMT as part of their game design (including, but not limited to, SL and Planet Entropia) and encourage their players to RMT.

It would be fascinating to have the exact wording of such legal proposal before speculating too much. Would it be possible to organise an English version?

[Andrew Crystall]

2.

"Enforcing the EULA's" has been a miserable failure (with many players ripped off, and IGE persuading many guild leaders to empty the guild coffers...and the guild membership list shortly afterwards), and there is no certaincy in many countries that the provision against RMT will stand, legally.

I have said for some time that Ebay is not IGE, and I find the proposal interesting. I'd need more context and a deacent translation before I could call it more than that.

[Jesse]

3.

Other then offering to buy in game gold from players. How has IGE persuaded guild leaders to empty the coffers? If a guild leader is irresponcible enough to sell the guilds gold for his own gain then the guild has bigger issues then IGE.

If a GM needs money to fund the outside expenses (Costly Webhosting, Ventrilo, etc) then he should ask his guild for donations through pay pal. Every year or so I do a drive for donations to the 'Meat Space' guild bank, so that I can continue to host expensive goodies, like Patch hosting, high quality Ventrilo with more then enough slots. Some people just can't afford the extra $50 to $100 US per month that running a high end guild can cost.

[Andy Havens]

4.

Edward: OK. If this is the answer, then I have a business idea. If it's OK for the little guys (the dad, the student, etc. that you mention) to engage in small-scale RMT, how about making that easier for them?

What if I set up a MySpace for RMT? RMTSpace let's call it. It's a social networking site with a combination of MySpace and eBay features that makes it easy for individual sellers of gold, items, characters, etc. to find buyers.

Because, of course, one of the things that the "business level" RMT you don't like does provide is convenience for buyers, and we know that the Web encourages the path of least resistance to commerce.

So... here's my RMTSpace site all nice and shiny. Lovely, individual folks can log in and set up accounts, little stores for their characters and wares, there's tagging, search, dialogue, all very town-square and commons (I'm thinking www.Etsy.com for MMOs).

Nice, right? And it's OK, as provider of the site for me to ask for, like a 2.5% cut of each transaction... right? I mean, PayPal takes a cut, and eBay does. If I set up this nice site that makes it easier for the nice people to RMT with other nice people, shouldn't I make a living at it? Again... I'm not sweat-shopping or indutrializing the gold farming... just enabling the same level of ease-of-use for both the sellers and buyers, eh?

Except... at that point, how hard would it be for "stealth" gold farms to then use my system as their front-office and UI? Maybe I've just provided a cover for IGE (and 10 like companies) to exist in the shadows, where there is no way to know they exist. The World is Flat. The tools can be distributed. If it can be done on eBay, it can be done more efficiently (but less centralized, from a tracking standpoint), on RMTSpace.

My point is just this... if you make "Level 1 Bad Behavior" OK, but "Level 2 Bad Behavior" illegal, guess what's going to happen?

[Scott M.]

5.

Government regulation so that certain groups don't "destroy what a game is all about" and to put a stop to the "erosion of fantasy."

Seriously? Those are the reasons? Can someone please enlighten me as to the real reasons? Surely the RMT business must be so economically powerful now as to justify regulation?

[mjh]

6.

Is there an argument to be made that a division between professional and amateur gold farming actually supports the fantasy? If enough people are farming in shifts in places where labor is cheap, it makes it less and less worth it for the guild bank selloff scenario.

It's like...knitting sweaters is only fun now that mass production has made it unnecessary? Not sure I believe this.

(though i have to say: the era of cheap wow gold was way better than now for people wanting to maintain a work/life/raid balance.)

[Verilazic]

7.

My point is just this... if you make "Level 1 Bad Behavior" OK, but "Level 2 Bad Behavior" illegal, guess what's going to happen?

Well, if the primary issue is stopping the erosion of the fantasy, then perhaps simply removing Level 2 behavior will create enough of an illusion to prevent that erosion. It's not so much removing the farmers, as removing the "presence" of IGE inside the game at that point, isn't it?

[magicback (Frank)]

8.

Well, level 1 bad behavior can't be enforced effectively, so level 2 bad behavior is what the government can really legislate.

Ted has his opininon, but I see this as the government legislating against "vice" as "internet gaming" (gambling) was legislated against in the US. In China, the government was more concerned about long "addictive" play time, so they legislated against playing more the certain hours in a day.

The real issue probably is that government are concerned that virtual currency may be a "real" currency of exchange. In China, Tencent (NASDAQ listed) has their own virtual currency that is being used by their membership as a very real currency (see Playnoevil, VERN, and news feed for more info).

The emergence of this very real currency does affect issues like tracking terrorist money, money laundering, etc. that many country's Financial Intelligence units will place close attention to the money trail. Imagine, the custom guy in the US airports asks first about how much US dollar you are taking in and out of the US and then proceed to ask about how much virtual currency among other currency you have in possession. Wouldn't that be a shocker when heard the first time?

Frank

[dave]

9.

Ed said, 'It's when their scale rises that macro-level effects start to be visible, including (what's most important to me) the erosion of fantasy.'

I'm not sure gold farming is a bad thing. I am very sure that gold farming doesn't contribute to any 'erosion of fantasy.' There is too many players saying, 'Go Bears' in the chat channels to even start to play fantasy.

Gold farming is kind of like prostitution. Every one likes sex but a lot of people aren't so sure you should make a living by doing it.

[Andy]

10.

@Frank: How do you have virtual currency "in your possession?"

"Sir... please step through this Isk detector..."

[V. Mardian]

11.

It's also important to note that this currenncy-only restriction can be easily defeated by buying and selling something like gold bars (has a fixed value and can be purchased/sold from NPCs in unlimited quantity for a few % spread). It's an item. If it were deemed NOT to be an item, where do you draw the line?

[Richard Bartle]

12.

I have two problems with this proposed law.

Firstly, it hurts those virtual worlds which were designed for RMT and which actively want RMT to occur. If IGE wanted to develop their own, pro-RMT virtual world and finance it from taking a cut of the inter-player trade in virtual goods, they should be allowed to do it. It seems that the reason South Korea wants to stop this is more to do with money laundering than game-ruining, though, so I don't expect this argument to have much support there.

Secondly, it doesn't go far enough. There isn't a clean-cut boundary between informal personal sales of virtual currency and company-enabled sales of it. This means it's easy to subvert. We have a similar problem in the EU, where it's permitted for people to import, say, cigarettes for their own personal use, but if they sell/give them to other people then there's an import duty to pay. Only yesterday there was a court decision saying than in order to qualify for the relacing of import duty you had to bring them with you personally rather than order them over the Internet (it's being appealed). In the past, people have got away with a "personal use" defence after coming back to the UK from France with a transit van full of cigarettes and liquor (there were 4 of them in the van, so they argued their unspecified "allowances" were shared). If you want import duty, you should have it on everything or nothing, because anything in between will tend towards the nothing end; likewise, if you want to prevent RMT then you should ban it totally or not at all, because a partial ban is just too easy to evade.

Richard

[Andrew Crystall]

13.

I disagree.

There is every difference between a sweatshop otufit like IGE and the average private seller. There is plenty of differentiation in law between businessand private sellers (with, for example, cars) in the UK and this is really no different in that scope.

[Endie]

14.

Hard cases make bad law. And this is dealing with horrendously complex and novel cases. If I were IGE's lawyer - an unlikely use of a decade-old degree in Scots Law, but bear with me - I'd be advising the company to be relatively sanguine, and using terms like "coach and horses" and "giggleworthy". The latter I would gravely claim to be a term of art.

That said, I think it's a rotten thing to use law for. I'm only the most soft of libertarians, but this is exactly the sort of meddling that I detest. The games companies have extensive EULAs, and it's their own fault if they have made them so unreasonable and unenforceable on the grounds of incomprehensibility to those affected that half an hour with a copy of the Unfair Contract Terms Act 1977 and some of Lord Denning's livelier obiter dicta would provide half a dozen "outs".

I don't want to come over all Kantian-universalising-maxims, but the fact is that if it's ok for your "dad" to buy a little gold, it's ok for me, and therefore, via a process of proof by induction, it's ok for anyone. And if it's ok for the student to sell n gold, then it's ok for him to sell n+1 gold, and so on. You can legislate to say otherwise, of course, and damn you for a positivist, but it's still true.

Richard, the law seems to be aimed at those acting in the capacity of agents, thus leaving direct selling by the person who owns the character at worst questionable, and by the RMT-model company itself (of course!) fine.

Thankfully, this looks (it's difficult to tell from the translation) to be the sort of law that some eedjit MP or another brings up as Private Members' Bills in the UK all the time, prohibiting their personal bugbears like spitting in the street, using the word "perjink" or playing volleyball with kittens or the like. It'll probably never work, and if it does then it'll export the problem somewhere else, like a few hundred miles north to the big orangey-red bit that doesn't really care but does like dollars.

[Moorgard]

15.

This ultimately comes down to establishing who owns the content, and then enforcing that ownership. If an MMO maker decides RMT within their world is okay, then they need to either develop their own system or license someone else to do so. But there needs to be an enforced law to prevent someone other than the content provider to make that decision for them.

[Neils Clark]

16.

1) It's a business

2) It's making money in Korea

It's taxable. Two potential problems are:

1) Cutoff for being considered a business. RMT-centered games looking for a profit are obviously businesses, though if the cutoff isn't sufficiently high it will choke many otherwise great games. Profit margin is probably the best way to determine cutoff.

2) Local enforecement: i.e. stopping Koreans (who often speak English) from buying gold/items from non-Korean unregulated (and presumably cheaper) RMT websites.

Governments (on the whole) don't yet care about who controls rights _inside_ of virtual worlds. They care about the real money going to businesses. They want some.

[Mithra]

17.

If your MMOG has an economic subgame, have no doubt about it... you CAN expect that on Day One a thousand industrious little workers will be lined up and coached on how to kill wolves (or whatever) so company x can put n currency on eBay that same week of release. And when your game flops, they'll keep grinding it out anyway. Take a look at what they're doing to ArchLord right now. :/ Legislation will not fix this.

I see the real problem in terms of A) there exists a billion Chinese people who are poor and will reliably invade every single game you make, and B) game companies continue to be surprised by this.

How do you deal with it? Not through EULA's and certainly not through unenforceable legislation. There must, in my opinion, be a rigorous effort to design away open-ended economies, OR enforce portability caps, OR allow RMT, OR let the company itself sell the stuff. Once upon a time, it was conceivable that virtual wealth might be a pretty cool and dynamic subgame/obstacle for players to overcome, but the facts on the ground are a little different today and aren't set to change.

[Lavant]

18.

The parallels to globalization abound. Although RMT can and definitely does have some negative effects, game developers (and governments for that matter) need not fear and pro-actively ban its very existence, but rather learn to harness its profitable nature. There will always be high costs associated with regulation and closed trade in any industry or economy. This is exactly what has been going on for some developers such as Blizzard and now is beginning to manifest itself through proposed government intervention in Korea. In this light, Castronova (see Cost-Benefit Analysis of RMT piece) shows how RMT produces a negative externality borne by those players and game companies not involved, insofar as it raises the marginal costs for players (the game is less fun) and game companies (the game costs more to run). The extent of these costs, however, is highly unknown, despite what theoretical elasticities one can fabricate. Many of these external costs arise solely from the attempt to curtail RMT. Reminds me a lot of anti-globalization sentiment, unfounded deadweight on an economic basis. However, were game companies and now governments to deregulate and lift various trade restrictions, RMT could provide an additional source of revenues, almost immediately eliminate the dead weight loss of trying to avoid RMT and in the medium run lower costs and raise profits. This form of market segmentation is key as Sony has begun to show with its Station Exchange program, allowing those who play Everquest II to directly buy virtual goods without the need of a third party intermediary. In light of the news from Korea perhaps the best way to protect the “magic circle” is not through unilateral protection, but openness, transparency and market segmentation. The Korean government is better served to focus its time, money, and energy on more pressing issues than curtailing economic freedom in game spaces, something truely to be thankful for on this thanksgiving weekend.

[Matt Mihaly]

19.

Ted wrote:

It's when their scale rises that macro-level effects start to be visible, including (what's most important to me) the erosion of fantasy.

This always confuses me. I don't mean to be too snarky, but don't you play the big mainstream virtual worlds? The ones where people talk about terribly in-role things like DPS and AoE and those damn Chinese gold farmers, and where a "roleplay server" more or less means that instead of encountering someone named "GanjaButt" you'll meet "Lord GanjaButt" instead?

Complaining about the magic circle being broken by RMT in something like WoW strikes me as eating at Burger King and complaining that if they just got blue packages for their ketchup instead of red, it'd be fine dining. (That's not a rip on WoW, which is a fantastic game.)

--matt

[Rachel]

20.

I agree on a few points but not entirely. Although this is probably the trend we are all heading toward to in the future, I think it is premature to create a separate bill. The law should exist to acheive equity and balancing interests, not to be uterlized as a tool to manulate the economy or society. I am not saying that is what the Korean government is doing here. However, it seems that the Korean government favors game companies over consumers---which is not surprising considering the industry has helped Korean economy significantly and gave them a recongnition internationally allowing them to directly compete against Japan and US game industry. I have no doubt that the game industry's interests have a great influence on the government.

However, again, one important fundamental aspect of law is equity and balance. Enforcing new laws properly require new standards. The area of law (virtual world monitoring) we are dealing with is a brand new area with little history of law enforcement (or none). I think it is a bit dangerous to create a separate bill so soon without a better, clearer, classification and definition about the aspect of business activities in online gaming (of course, the factor should be considered is not limited to this).

I am an advocate for protecting our "magic circle (borrowing Mr. Castronova's quote)" because I am a resident of MMORPG worlds and because I want to preserve the environment I adore. Forbidding RMT may help preventing "fantasy world" to be spliled over the "magic circle" in one sense; however, more regulations and government interferences do not necessarily protect the preservation of the "magic circle" or people who reside within, particularly if the regulations favor the business or a certain interest group over users.

I am not anti-regulation; however, I also know the danger of "unreasonable law (I am not saying the Korean law is---talking hypothetically)" which will create case laws and then the standard. And it will take much time and debate to amend it.

[Ola Fosheim Grøstad]

21.

Matt: where a "roleplay server" more or less means that instead of encountering someone named "GanjaButt" you'll meet "Lord GanjaButt" instead?

Funniest comment on Terranova this week. LOL. And very much to the point. I doubt RMT would be a problem for a hardcore roleplaying MMO (300-500 simultanous), provided you have transparent transactions. Clearly, in-game cultural values can be a strong control mechanism. Panopticon-effect too.

Still, I think a law will reduce the market, players are probably more willing to part with their money if they make purchases using a reputable service. If you really want to curb RMT, then make credit card companies responsible for preventing "gambling" transactions. That's what in place in Norway (you cannot collect gambling debts), although banks would like to see that law go...

[Matt Mihaly]

22.

Ola wrote:

I doubt RMT would be a problem for a hardcore roleplaying MMO (300-500 simultanous), provided you have transparent transactions. Clearly, in-game cultural values can be a strong control mechanism. Panopticon-effect too.

Absolutely. RMT is not prevalent in any hardcore roleplaying MMO that I'm aware of. It's most prevalent in the games that support and encourage the least amount of roleplaying/magic circle immersion.

--matt

[Isaac]

23.

I'm currently working on an undergrad research paper that explores the hypothesis that markets for RMT exist because the virtual economies of MMO's (my focus is on WoW) create barriers to many types of conceivable in-game transactions.

I'm not sure a new law is the way to go for RMT. As an (ableit burgeoning) economist, I am interested in how circumstance and institutional structures create the conditions for organizations/individuals to demand and supply a good or service - in this case RMT. Anti-RMT efforts, be they mass account eliminations or government laws, are band-aids - they do not rectify the conditions on the ground; rather, they make enforcement that much more difficult by driving markets underground. Government is a notoriously blunt instrument of change, and a prolific innovator in the realm of unintended consequences.

Why not seek solutions within virtual economies and VW's themselves? Why should game-makers be allowed to blame anyone but themselves for RMT, when it is the virtual economic conditions that they created that make RMT appealing to players in the first place?

I am aware of Prof. Castronova's work on this topic, but IMHO the tradeoff between RMT and RL time does not fully answer the question of why players demand RMT in the first place.

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