China Media & Entertainment Law Report : China Media Lawyer & Attorney : Reed Smith Law Firm : Entertainment, Sports & Consumer Rights Law

On November 13, 2009, the Ministry of Culture ("MOC") issued a notice on online game content control issues.  The new rules require operators to: establish internal control systems; strengthen file management systems for imported and domestic online game content; supervise and prohibit games with illegal content; and improve social supervision and industry self-discipline.

The MOC also will be issuing a general outline for training and examining online game enterprises.  The notice also indicated that MOC will be promulgating amendments to rules governing the content investigation process and other regulatory matters in the online games sector.  Provincial level culture administrations are slated to be responsible for investigations of online gaming operations in their respective jurisdictions.
 

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The latest move in the continuing saga between the Ministry of Culture [MOC] and the General Administration of Press and Publication [GAPP] over popular online game World of Warcraft has led to MOC reiterating its sole responsibility for the administration of China’s online games market.

NetEase, operator of the game in China, recently made World of Warcraft available online again after a two-month hiatus imposed by government regulators which was originally attributed to the game’s controversial content. However, following resumption of the game on September 19, GAPP issued a notice ordering NetEase to cease operating World of Warcraft in China.

The battle has intensified this week, with the Ministry of Commerce on November 3 issuing an official statement that GAPP has no authority to administer the actions of World of Warcraft, and that its notice on terminating the examination and approval of World of Warcraft was invalid, given that MOC is responsible for the administration of online games.

To further emphasize its stance, MOC today released an official announcement of its intention to conduct investigations into illegal online gaming products and operations, asking local cultural departments to conduct investigations into online games within the month. The announcement noted that, as the administrator of the online games industry, MOC’s responsibilities include regulating online games and strictly punishing illegal online game products and operations.
 

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On July 27, 2009, the Ministry of Culture Issued the “Circular on Investigation into ‘Gangs’ and Other Illegal Online Games”. The Circular notes that some popular online games based on the themes of gangs, the mafia, or “godfather” concepts advocate obscenity, gambling, or violence and undermine morality and traditional Chinese culture. It goes on to note that these games encourage people to deceive, loot, kill, and glorify the lives of gangsters, providing a negative influence on youngsters. The Ministry of Culture has prohibited websites from running, publicizing, or offering such online games, and has also ordered its law enforcement bodies to step up oversight and harshly punish any sites that continue to offer such games.

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Foreign companies and their Chinese partners have always been major players in the Chinese online gaming market. The partnership normally is has the foreign company licensing rights to a Chinese partner. The Chinese partner is then responsible for developing the local market. The Chinese partner is required to apply to the Ministry of Culture’s Content Censorship Commission (“CCC”) and the China’s General Administration of Press and Publication (“GAPP”) for pre-approvals to distribute the game. CCC censors game content and reviews the license agreement, which becomes effective upon CCC approval. GAPP examines the qualification of the Chinese partner to provide foreign online game services and decides whether to issue a License for Internet Publishing Service to the Chinese partner.

Chinese companies have accused foreign gaming companies of abusing their copyrights via unfair and arbitrary contractual terms. The Ministry of Culture and GAPP seem to be responding to these accusations by cracking down on foreign online gaming companies. On April 24, 2009, the Ministry of Culture issued the “Notice of Regulating the Censorship and Reporting Mechanism on the Content of Imported Online Games” (“MOC Notice”), and on July 20, 2009, GAPP issued the “Notification on Strengthening the Administration of Approval of Imported Internet Games” (“GAPP Notification”).

These two sets of regulations seek to tighten the control over the activities of foreign online gaming companies in China:

1. Each foreign online game must be distributed in China by a single Chinese partner with exclusive rights.
2. In the event that the Chinese partner is changed, the game is renamed or new game versions are released, the Chinese partner must re-apply with CCC and GAPP for approvals.
3. Foreign operators who are deemed to have included arbitrary contractual terms in their distribution agreements will be sanctioned and CCC may suspend its approval of the relevant foreign online game.
4. GAPP has expanded its authority to review the import of foreign online games for exhibition, demonstration, trade or promotional activities, all of which are now prohibited without GAPP pre-approval.

Kou Xiaowei, Deputy Chief of the Sci-tech and Digital Publishing Department at GAPP, stressed that GAPP would not discriminate between Chinese and foreign game service providers during the approval process. Still, Chinese produced online games only require filing with the GAPP before distribution, approval with GAPP or CCC is not a requirement.

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