"Outpaces," is the word the FTC's report uses in describing the games industry's conduct among its peers, noting the 80 percent prevention rate in keeping M-rated content from minors, and keeping ads for M-rated games off the television prior to 10 pm.

Further: "The Commission commends the ESRB for its new online ratings summaries, which provide a more detailed explanation of the content that factored into a game's rating. This tool should enhance parental understanding of the ratings and the ratings process."

Entertainment Software Association President Michael Gallagher called the report "a strong acknowledgement and validation that industry-led self-regulation efforts are the best way to provide parents and retailers with the resources and support they need to keep our kids' entertainment experiences suitable."

The report evaluates the marketing and adevertising practices across the entertainment industries. It's the FTC's seventh such report since 2000.

Games Industry Best Regulated of All Entertainment Sectors [GamesIndustry.biz]

Bloggers, as reported earlier, are specifically mentioned by the recommendation, which has obvious implications for the specialty press covering video games. "The post of a blogger who receives cash or in-kind payment to review a product is considered an endorsement. Thus, bloggers who make an endorsement must disclose the material connections they share with the seller of the product or service."

The pivot here is what constitutes an in-kind payment. Games do have a value, but is agreeing to review a game an endorsement, regardless of whether the review recommends it or not?

It's also important to note these new guidelines do not themselves have the force of law. They are:

"[...] administrative interpretations of the law intended to help advertisers comply with the Federal Trade Commission Act; they are not binding law themselves. In any law enforcement action challenging the allegedly deceptive use of testimonials or endorsements, the Commission would have the burden of proving that the challenged conduct violates the FTC Act."

So there are two layers here: One, that it's not even law and two, does it even apply to video game reviews? Either way, the singling out of a blogger's endorsement is significant.

FTC: Freebies Must Be Disclosed [Game Politics]

The commission, in the process of reexamining the disclosure rules for their truth-in-advertising guides, are now calling out bloggers as a potential issue. The commission says it is looking into the legitimacy of blogger opinion and whether access to review product influences their write-ups. They don't, however, seem to be concerned over similar practices in the print and mainstream media.

Instead of relying on specific rules, the FTC's guides use a set of examples to lay out issues that they have identified. In talking about the importance of disclosure of material connections between the endorser and the seller, the guide uses an example aimed directly at online video game journalism:

Example 7: A college student who has earned a reputation as a video game expert maintains a personal weblog or "blog" where he posts entries about his gaming experiences. Readers of his blog frequently seek his opinions about video game hardware and software. As it has done in the past, the manufacturer of a newly released video game system sends the student a free copy of the system and asks him to write about it on his blog. He tests the new gaming system and writes a favorable review. The readers of his blog are unlikely to expect that he has received the video game system free of charge in exchange for his review of the product, and given the value of the video game system, this fact would likely materially affect the credibility they attach to his endorsement. Accordingly, the blogger should clearly and conspicuously disclose that he received the gaming system free of charge.

While this example is talking about free consoles, what about free games or free movies or free books?

Most newspapers allow their critics to go to free screenings of movies so they can write a movie review. Most newspapers, in my experience, also allow critics to receive game code in one form or another and even retain loaner consoles so they can review games. Certainly every major gaming website, from GameSpot to IGN take free copies of games for review.

What's troubling about this FTC example isn't the expectation that the blogger should disclose that they received a free console, but that the rule seems to single out bloggers.

In seeking to delineate between a professional writer and a blogger, the FTC approaches a slippery slope that could very easily end with the government deciding who is and who isn't a journalist.

Equally troubling is the coverage of this issue by the New York Times, which seems to almost deliberately not get it. In a Sunday story entitled "When a Blogger Voices Approval, a Sponsor May Be Lurking", the New York Times reports on the issue making it clear that unlike journalists, some bloggers are for sale:

"But unlike postings in most journalism outlets or independent review sites, most companies can be assured that there will not be a negative review: if she does not like a product, she simply does not post anything about it."

I do like some of the ideas spelled out in the document, in particular the notion of advertising and marketing folks not being allowed to flood a message board with false praise for their product without identifying themselves. But who is going to differentiate between "most journalism outlets" and "independent review sites" and bloggers? And how will they do so?

When the government gets in the business of identifying journalists and setting up a separate set of rules for those that don't make the cut, it's more than a little troubling.

[Pic]

GameStop's "check-out" policy, confirmed to Kotaku by a number of the chain's managers and employees, could fall under scrutiny of the Federal Trade Commission.

Reached for comment this afternoon, GameStop officials declined to comment.

"We do not comment on corporate policies that are competitive in nature," said Chris Olivera, vice president of corporate communications. "As your questions relate to company training, operations and discounting practices, I would not be able to provide feedback."

Kotaku contacted the FTC earlier today to determine if the practice, which sells games already played by employees at the new price, not the used price—used titles are typically priced about $5 cheaper than brand new versions—would be considered deceptive advertising or marketing. The FTC's Bureau of Consumer Protection is mandated to protect consumers against unfair or deceptive acts or practices in commerce. Violations of FTC restrictions are a violation of federal law, according to the commission.

"The Federal Trade Commission protects consumers from unfair or deceptive advertising and marketing practices, and we encourage any consumer with a complaint about a company's business practices to contact us," said FTC public affairs specialist Betsy Lordan.

Lordan said she was unable to confirm or deny the existence of any investigation that the commission is conducting. As a rule the FTC does not comment on the conduct of a particular business.

The company's check-out policy, provided to us and verified by a number of GameStop employees states:

Associates are allowed to check out one item of store merchandise for personal use for up to four days. Merchandise checkout is a privilege, not a right, and may be revoked at any time.

Hardware, accessories, sealed CDs or software programs that must be altered to install may not be checked out. If the on-hand quantity of a product equals one, the item cannot be checked out. Hot titles may also be prohibited from being checked out, regardless of the on-hand quantity in the store.

Associates may only check out items from the store in which they work. Associates are personally responsible for any merchandise they are allowed to check out.

Merchandise must be properly checked out in the Employee Merchandise Check Out Log in the Game Planner.

If the product is returned in unsellable condition, or if anything is missing from the package, or if the product is not returned, the Associate must purchase the product at the current price less Associate discount.

Copying of the software and/or manuals/instructions is illegal and is strictly prohibited. Merchandise that leaves the store without being properly checked out or purchase is considered to be unauthorized removal of Company property and may result in performance coaching up to and including termination of your employment.

According to a number of GameStop employees and managers across the country, all of which spoke to us on the condition of anonymity, new copies of games rented out to employees are often mixed in with the unplayed display copies. And both are sold at "new" prices.

When a shipment of video games initially arrives at a store, managers are told to "gut" several copies of the game, removing the disc or cartridge from the packaging so it can be displayed on the shelf without concern of theft, according to our sources.

The games are then placed in protective sleeves or cases under the counter. If a customer asks why the game is not sealed they are typically told the the game is a display copy. The game is still sold as new.

When check-out games are returned, we were told, they are placed with the gutted display copies. If a customer asks about these, they are typically told they are display copies, not that they have been played before.

Since the copies are often placed with display copies, even managers and employees typically don't know which of these games have been played and which haven't.

While some GameStop managers will on occasion offer a "Shop Worn Discount" for a gutted or checked out title, we are told by our sources that this is actually against GameStop policy which states:

"Do not apply Shop Worn Discounts to any new, used or checked out games, it may only be applied for damaged packaging and new accessories which have been opened."

Headquartered in Grapevine, Texas, GameStop is the world's largest video game retailer, operating nearly 6,000 stores worldwide. The company's revenue was $8.8 billion in 2008.

Michael McWhertor contributed to this story.

Update: Legal experts way in on the story.

“All timely and responsive public comments, whether filed in paper or electronic form, will be considered by the Commission, and will be placed on the public record of this proceeding,” says the posted FTC notice.

This matters to you, dear gamer, because DRM is a pain for gamers and hardly an obstacle for PC game pirates. Games for Windows Community Manager Ryan Miller backs this up on his blog. Take the time to tell the FTC this and Microsoft might actually have to start playing nice.

The actual Town Hall meeting will take place in Seattle, WA on March 25, 2009.

Check out the form here.

Umm. Do Ninjas wear cloaks? Perhaps the metaphor breaks down a bit at that point.

No matter - the point is that EA has entered into a confidentiality agreement with Take-Two and both parties are now obliged to keep their lips tightly zipped with regard to the companies ongoing discussions.

Following the FTC's announcement last week that they would not oppose any merger, EA decided not to renew the formal bid and has been having some cosy chats with its new friends at Take-Two.

Cosy chats that from now on we will not be party to. Bah.

EA: We Might Be Talking To Take-Two, We Might Not. But We're Not Talking About It Publicly Anymore [Sillicon Alley Insider]

Upon further review of this matter, it now appears that no additional action by the Commission is warranted at this time. Accordingly, the investigation has been closed.

So.. essentially EA are free to pursue their merger. Or would be, had they not let their bid expire on Monday.

With the FTC investigation put to bed, though, EA are now able to enter into private negotiations with Take Two. Take Two is now to give EA its three-year financial forecasts and the game will continue...

An EA merger with Take-Two gets U.S. antitrust OK [Reuters via GamePolitics]

That is, unless the FTC finishes its investigation sooner. It's now got the information it needs from EA in its quest to determine possible antitrust issues, but Take-Two has appeared to struggle with fulfilling the broad-ranging request; when it was initially uncompliant, the District Court of Washington, D.C. had demanded it show cause, with Take-Two risking an injunction if it failed to pony up.

However, Tiffany Steckler of EA's corporate communications said that the August 21 timeline applies regardless of what Take-Two does:

"Whatever happens with Take-Two's process doesn't impact [the FTC's] timing, because our agreement with the FTC provides that they complete their review within the 45 days," she said.

Take-Two eventually reached a compromise with the FTC through which it'd be able to provide all the necessary information, but it has yet to fully certify compliance with the FTC, as EA has done as of market close yesterday.

EA's offer still remains at $25.74 per share, which for the past several weeks has been slightly below Take-Two's daily average share price — but now, things have changed:

Take-Two is currently trading at $23.99, which might make a sale to EA a big gain for shareholders in an economic downturn. Why has Take-Two's price been slumping?

Many analysts had theorized that, once the hype around Grand Theft Auto IV's launch began to ebb, Take-Two's share price would see a gradual adjustment back downward. Prior to EA's offer, the price per share had lingered at about $17 before the stock saw a spike largely on anticipation of the offer, and in some part on the strength of GTA IV. But it may be that post-launch for the major title, while at the same time EA's offer appears to hang in compliance limbo, investors are becoming impatient and selling off.

Most likely, though, the lower share price is due to the overall market downturn and concern about oil prices, and has nothing to do with EA's offer, says Wedbush Morgan analyst Michael Pachter. EA, as well as many other companies in the industry, are seeing somewhat lower values as well.

"It's nothing in particular concerning video game stocks," Pachter said. "Take-Two is worth the same, it won't impact EA's offer."

Said a Take-Two spokesperson, "Our position with respect to EA’s tender offer remains unchanged. Take-Two’s Board is committed to and focused on a process of considering all strategic alternatives to maximize the value of Take-Two. We are considering any and all alternatives which will deliver greater value to stockholders than the current EA offer."

The U.S. District Court of Washington D.C. had asked Take-Two to show why it wasn't complying with the FTC's broad-ranging information request as it investigates potential antitrust issues for the possible combination, probably regarding the companies' sports portfolios.

For its part, Take-Two had claimed that complying with the full scope of the FTC's requests would have been too expensive and labor-intensive, and asked for "reasonable limits."

It's now gotten those limits yesterday through an agreement with the FTC, and the investigation will now continue without the need for Take-Two to appear in court. EA had also previously reached an agreement with the FTC that would delay any acquisition attempt until the completion of the investigation - the fact that Take-Two won't have to appear in court should simplify the process quite a bit.

Said Take-Two in a statement, "The Company is pleased that a resolution has been reached that should substantially reduce the economic burden on the Company and focus the inquiry in a way that should minimize the distraction to the Company’s employees. The Company intends to continue to cooperate fully with the FTC."

EA's current offer deadlines July 16th, but any acquisition will have to wait until the FTC makes its final determination.

ECA President Hal Halpin called the results, which improved significantly over 2007, "an extraordinary accomplishment," praising retailers' commitment to keep M-rated games out of kids' hands. "Perhaps most impressive is the incredible reversal in their failure rate over such a short period of time and with a comparatively new rating system," Halpin said.

"This is truly a vindication for video game merchants who have been falsely damned by anti-game advocates and special interest groups, who now don't have a leg to stand on. Our congratulations and thanks are extended to these retailers, who, above music and movie merchants, have proven their word, empowered parents and shown a commitment to corporate social responsibility."

The FTC survey, and Halpin's comments, come just on the heels of a bill in the U.S. House that would levy $5,000 fines for retailers who sell adult games to kids. The proposed legislation is similar to bills in states such as Oklahoma, Illinois and California, that were all ultimately ruled unconstitutional in 2007.

The survey, which also looked at R-rated movies, DVDs and "Parental Advisory"-labeled music, found that video games had the best enforcement rate.

The FTC also broke out its statistics by retailer. GameStop topped the list with a 94 percent enforcement rate, while Hollywood Video came in last with 60 percent enforcement.

The FTC announced its results just as Republican representative Lee Terry and Democratic representative Jim Matheson introduced a bill in the U.S. House of Representatives that seeks to reinforce Entertainment Software Ratings Board ratings at retail with $5000 fines for violators.

According to the FTC's study, ratings enforcement at retail has increased steadily since 2000, when 80% of its undercover shoppers successfully purchased M-rated games.

The ESRB conducts its own secret-shopper studies using the same surveyors as the FTC. Its most recent survey in November 2007 found 76 percent compliance with store policies.

"Video game retailers have clearly stepped up their efforts to enforce their store policies, and they deserve recognition for these outstanding results," said ESRB president Patricia Vance, in a statement released today. "We commend and applaud retailers for their strong support of the ESRB ratings, and will continue working with them to help ensure that these levels of compliance are sustained if not further increased."

Undercover Shoppers Find it's Increasingly Difficult for Children to Buy M-Rated Games [Federal Trade Commission

While video game retailers have made "significant progress" in limiting the sale of M-rated games to children, movies and music retailers have only made modest progress, according to a report released today by the Federal Trade Commission.

In its latest report to congress, the fifth and most comprehensive study since 2000, the FTC said that while the entertainment industry generally comply with their own standards, the movie, music and gaming industries continue to market adult content to a teen market.

"Self-regulation, long a critical underpinning of U.S. advertising, is weakened if industry markets products in ways inconsistent with their ratings and parental advisories," said FTC Chairman Deborah Platt Majoras. "This latest FTC report shows improvement, but also indicates that the entertainment industry has more work to do."

The most substantiated part of the report comes from an FTC mystery shipper program where unaccompanied children, 13 to 16 years old, tried to make purchases from retailers.

Video games showed the greatest improvement, dropping from 69 percent being able to make the purchase in 2003 to 42 percent in 2006. That's just three percent more than the number of underage children able to get into R-rated movies.

While the mystery shopper study makes for an ugly chart and shoots copious holes in the whole "movie theaters do a substantially better job than video game stores" argument, there's also some interesting grist in the rest of the report.

The study found that while ads for M-rated video games on television shows that are popular with teens are dropping, the same can't be said for internet advertising.

I didn't know this, but the ESRB prohibits ads for M-rated games on web sites where the under-17 audience is 45 or greater and the FTC thinks that the board is not adequately enforcing that rule.

The board is, however, doing a good job of informing gamers and parents about the rating system with 87 percent of parents surveyed saying they are aware of the ESRB system, more than 70 percent use it and three-quarters of the parents surveyed understand the content descriptors and use them.

Many of the parents surveyed did say they wish the system could do more to inform them about the level of violence in games. What do they expect? A frag count?

The FTC did a little digging into the emerging trend of companies using sites like MySpace or YouTube to advertise their goods. They point out that typically when this is done, the page doesn't include any prominent rating information. I guess that would sort of kill the cool of a page wouldn't it?

The report also notes that mobile games often don't try to get ESRB ratings, which is a bad thing, in my opinion.

While the 140-page report wraps up by saying that the Commission continues to support industry self-regulation (sorry Clinton) due to "important First Amendment considerations", it does call for some changes.

For gaming, the FTC calls, again, for the content descriptors of a game to be listed on the front of a title. Sounds like that while possible, that could get really messy. And I don't see DVDs doing that.

This is as important a document as the video game industry can get. Not only does it show that the industry is making vast improvements in the field of education and restricting content to minors, it shows that the video game industry is on the cusp of doing a better job than the oft-cited movie industry.

Good job ESRB. Brian Crecente

The report [FTC]

Oftentimes, internet detectives work out the relationship themselves. In the case of the I Love Bees campaign, those plodding through the Halo 2-based alternate reality game courtesy of 42 Entertainment and Microsoft were well aware of the relationship and seemingly quite enjoyed being marketed to.

However, when viral marketing goes horribly wrong, it can lead to backlash, say in the case of Sony's very recent attempt to shill PSPs via YouTube and embarrasingly composed blogs, or Sony's former attempt to shill PSPs with edgy street grafitti.

Let's hope this move cuts down on the lame attempts to covertly market to us so we can tell the authentic shitty YouTube videos from the fake shitty YouTube videos. Michael McWhertor

FTC Moves to Unmask Word-of-Mouth Marketing

Early last month, the FTC announced that they were putting the company on notice that any future misrepresentation of video game ratings or content descriptors would result in a xxx fine. And that the company needed to implement a system to "ensure that all game content is reviewed in connection with submissions to ratings authorities."

While the FTC ruling was announced last month the public, and in particular politicians, had 30 days to comment on the action, or inaction as some naysayers put it, and the FTC could have changed its mind. Now that the 30 day period has passed the decision is set in stone.

Take-Two Interactive also pointed out that the consent order and agreement was unanimously approved by the commission.

Paul Eibeler, President and Chief Executive Officer, stated, "We are extremely pleased that the FTC has concluded its very thorough investigation, and that the matter has been resolved. We recognize the importance of maintaining public confidence in the Entertainment Software Rating Board (ESRB) rating system and helping the ESRB educate parents and consumers about the rating system. We look forward to putting this behind us and focusing on what we do best - creating video games."

It's good to see that politicians weren't able to influence the decision of the FTC following their investigaiton. It even managed to withstand congressional hearings. Hit the jump for the official press release. Brian Crecente

Take-Two Interactive Software, Inc. (NASDAQ: TTWO) announced today that following the 30-day period for public comment, the Federal Trade Commission (FTC) has unanimously approved the Consent Order and Agreement with Take-Two and its wholly-owned publishing label Rockstar Games. All outstanding matters pending before the FTC have been settled and no penalties or fines have been assessed. Among other things, the Consent Order provides that the Company shall not misrepresent a video game's ratings or content descriptors and that the Company shall implement a system to ensure that all game content is reviewed in connection with submissions to ratings authorities.

Paul Eibeler, President and Chief Executive Officer, stated, "We are extremely pleased that the FTC has concluded its very thorough investigation, and that the matter has been resolved. We recognize the importance of maintaining public confidence in the Entertainment Software Rating Board (ESRB) rating system and helping the ESRB educate parents and consumers about the rating system. We look forward to putting this behind us and focusing on what we do best - creating video games."

This week the Entertainment Software Ratings Board announced Commitment to Parents, an effort geared at bolstering consumer confidence in the current rating system for video games.

Granted that's just my take on the initiative. I spoke with ESRB president Patricia Vance earlier this week about the program and she denied it was spurred by the on-going congressional hearings or Hot Coffee.

Either way, what really matters though is that the industry is taking some steps to tweak one of the chinks in their rating system's armor: retail enforcement.

While the program doesn't really have any teeth, it still does a good job of trying to create a culture of compliance, but building a retail "council" that requires members to follow the rules.

In essence what this does is creates a seal of approval for concerned parents. If you're worried about what your kids buy, just make sure they shop at a retailer that's a member of the ESRB Retail Council.

To be a member of the council, retailers have to enforce the ratings, train their sales staff about the rating system, promote the rating system in the store and through circulars and establish a system for consumer complaints about sales violations.

The most important element of the program is the creation of a mystery shopper program, which will track sales policy enforcement through two audits a year.

Vance tells me that they plan to have mystery shoppers hit about 100 stores from each chain during each audit.
While they will report the overall results of the audit, the ESRB won't break it down by retailer. That's unfortunate, because nothing would help compliance more than the thought of a public drubbing in the press or by politicians.

While I think this is a great step forward, I still think the ESRB has to reexamine the way they rate games. I know there's no easy answer for a medium that can contain such branching storylines and content, but letting developers or publishers choose what the raters see is tantamount to letting the fox guard the hen house. Brian Crecente

Game Industry Strengthens Ratings Enforcement [Rocky Mountain News]

Federal Trade Commission NewsOffice of Public Affairs -Press Releasewww.ftc.gov
600 Pennsylvania Avenue, NW Washington, D.C. 20580 202-326-2180 opa@ftc.gov

FOR RELEASE: June 8, 2006

Makers of Grand Theft Auto: San Andreas Settle FTC Charges
FTC Alleged Companies' Game Content Claims Deceptive

The companies behind the popular Grand Theft Auto: San Andreas video game have agreed to settle Federal Trade Commission charges that they failed to disclose important information about the game's content to consumers. According to the FTC, the companies, in advertising the Entertainment Software Rating Board ("ESRB") rating for the game, did not tell consumers that the game discs contained potentially viewable nude female characters and a potentially playable sex mini-game. Although San Andreas players could not access or view this sexual content during normal game play, sophisticated players posted a program on the Internet, dubbed "Hot Coffee," that revealed this content on the PC version of the game. PlayStation 2 and Xbox players eventually were able to access the Hot Coffee content by modifying or adding an accessory to their game consoles, installing special software, and inputting "cheat codes" developed by third parties. These developments led to a more restrictive rating by the ESRB.
"Parents have the right to rely on the accuracy of the entertainment rating system," said Lydia Parnes, Director of the FTC's Bureau of Consumer Protection. "We allege that Take-Two and Rockstar's actions undermined the industry's own rating system and deceived consumers. This is a matter of serious concern to the Commission, and if they violate this order, they can be heavily fined."

The ESRB originally rated the game's three versions, for PlayStation 2, PC, and Xbox, as "M" for Mature, with the accompanying content descriptors of Blood and Gore, Intense Violence, Strong Language, Strong Sexual Content, and Use of Drugs. According to the ESRB, video games rated "M" contain content that may be appropriate for those aged 17 and older. The rating information, including the rating symbol and content descriptors, appeared in print, television, and retailer ads for the game, and on game packaging for all three versions, including the claims "MATURE 17+" and "CONTENT RATED BY ESRB."
-more-

The ESRB re-rated San Andreas as AO ("Adults Only"). Games rated AO, according to the ESRB, have content that should only be played by persons 18 and older. As a result of the re-rating, many national retailers pulled the game from their shelves.

Under the terms of an agreement with the ESRB, the companies released a patch that, if downloaded and installed on the game, disables the "Hot Coffee" program; the patch is available for download at http://www.nomorehotcoffee.com. The companies also agreed to re-label or recall all existing inventory. According to the game's publisher, Take-Two Interactive Software, Inc., the company incurred $24.5 million in costs associated with returns of San Andreas stemming from the re-rating. The companies subsequently published a second, M-rated edition of San Andreas without the nude images and mini-game content.

The companies that developed and marketed San Andreas, Take-Two and Rockstar Games, Inc., are both headquartered in New York City. The FTC's complaint charges that the companies violated the FTC Act by representing that San Andreas had been rated "Mature" and assigned certain content descriptors by the ESRB, but failing to disclose to consumers that the game discs contained unused, but potentially viewable, nude female images and disabled, but potentially playable, software code for a sexually explicit mini-game that the ESRB had not rated.

The proposed consent agreement with the FTC requires Take-Two and Rockstar Games to clearly and prominently disclose on product packaging and in any promotion or advertisement for electronic games, content relevant to the rating, unless that content had been disclosed sufficiently in prior submissions to the rating authority. In addition, the companies cannot misrepresent the rating or content descriptors for an electronic game. Finally, the companies must establish, implement, and maintain a comprehensive system reasonably designed to ensure that all content in an electronic game is considered and reviewed in preparing submissions to a rating authority. Once the order becomes final, the companies will be subject to civil penalties of up to $11,000 per violation if they violate the order. The companies will be subject to compliance reporting requirements to ensure that they meet the terms of the order.

The Commission vote to accept the proposed consent agreement was 5-0. The FTC will publish an announcement regarding the agreement in the Federal Register shortly. The agreement will be subject to public comment for 30 days, beginning today and continuing through July 10, after which the Commission will decide whether to make it final. Comments should be addressed to the FTC, Office of the Secretary, Room H-135, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC is requesting that any comment filed in paper form be sent by courier or overnight service, if possible, because U.S. postal mail in the Washington area and at the Commission is subject to delay due to heightened security precautions.

Copies of the complaint, proposed consent agreement, and an analysis of the agreement to aid in public comment are available from the FTC's Web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC works for the consumer tovprevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint in English or Spanish (bilingual counselors are available to take complaints), or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1-877-382-4357), or use the complaint form at http://www.ftc.gov/ftc/complaint.htm. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to thousands of civil and criminal law enforcement agencies in the U.S. and abroad.

-3-

"According to the FTC, the companies, in advertising the Entertainment Software Rating Board ("ESRB") rating for the game, did not tell consumers that the game discs contained potentially viewable nude female characters and a potentially playable sex mini-game. Although San Andreas players could not access or view this sexual content during normal game play, sophisticated players posted a program on the Internet, dubbed "Hot Coffee," that revealed this content on the PC version of the game," FTC officials said.

While the company was not fined, they have been placed on notice that if they again violate the ratings, they will be subject to a civil fine of up to $11,000 per a violation.

Calls into Take-Two Interactive, the Entertainment Software Association and Senator Hillary Clinton had not been returned as of press time.

Today's findings come after a nearly year-long investigation into the publisher, developer Rockstar Games and the infamous Hot Coffee content found in Grand Theft Auto: San Andreas.

Hot Coffee, a bit of hidden sex found behind the apartment doors of the game, was discovered last July after a modder released a hack for the game that unlocked the previously hidden content.

At the time Rockstar first denied the claim that the content was in the game and then later said it was a piece of unused programming left on the disc, but not meant to be seen or played.

On July 20, the Entertainment Software Rating Board rescinded the game's rating and asked retailers to stop selling the game.

Take-Two agreed to a recall and rereleased the game with the content removed. According to the FTC, Take-Two incurred $24.5 million in losses associated with the GTA recall.

The recall came a week after Sen Hillary Clinton called for the FTC to investigate Take-Two interactive for deceptive marketing practices. That was followed by a similar request by the House of Representatives, which passed a resolution asking for an investigation.

While neither Clinton nor the House have the force of law to require the FTC to launch the investigation, it did certainly help the commission decide to look into Hot Coffee.

When I spoke with FTC spokeswoman Claudia Bourne Farrell last year she told me that the investigation would only be made public if enforcement action were taken. She added that in general, if the FTC were to find wrongdoings in an investigation, they have the ability to require a defendant to "give up their ill-gotten gains."

The FTC found that Take-Two and Rocksta Games violated the FTC Act by "representing that San Andreas had been rated "Mature" and assigned certain content descriptors by the ESRB, but failing to disclose to consumers that the game discs contained unused, but potentially viewable, nude female images and disabled, but potentially playable, software code for a sexually explicit mini-game that the ESRB had not rated."

Instead of fining the company, the FTC proposed a concenst agreement that requires the company to disclose all hidden content on their packaging that might be relavent to the rating, unless it was disclosed to the ESRB during the rating process. They also are requiring the comapany to develope a system to ensure that all content in a game is considered and reviewed while preparing to submit a game to the ESB.

Take-Two agreed to the proposal and the commission voted 5 to zero to accept it.

While Take-Two got off with a slap on the wrist, the greater issue at stake here is Clinton's claim that the ESRB's rating system is currently ineffectual at enforcement. Clinton would rather have a government run rating system than one run by the industry.

As this unfolds, nearly a year after Hot Coffee scalded the industry, congressional hearings are gearing up to examine both the impact gaming has on childen and the effectiveness of the ratings board. Coincidentally, just hours before the FTC announcement, Clinton put out her "Media Guide for Parents." The guide, she says, is to help parents make sure that when their children are on the Internet, playing video games or watching TV, it's safe and age-appropriate."

I've said it before and I'll say it again, this is video games own Seduction of the Innocents. Welcome to the Fourties

With a decision by the FTC looming, you can expect a return to the full-on hysterical coverage of the game by mainstream and industry press alike.

While I can't imagine Take-Two will suffer more than a slap on the wrist, the bigger picture implications of this decision could be quite frightening. If, for instance, the FTC decides that Take-Two was deceptive they can't help but also lay some major blame on the Electronic Software Ratings Board.

Sure, the reasoning will likely go, Take-Two bent/broke the rules, but why didn't the ratings board catch them? And that would play straight into the hands of Hillary Clinton, who last year called out the ESRB's rating system, saying it was broken.

Coincidentally, as we speak congress, languid in the stifling heat of a Washingtonian summer, is ambling its way through a congressional hearing on video games and ratings.

This, readers, is what you call the makings of a perfect storm. A storm that no amount of wining and dining can stop. Brian Crecente

Anyway, after Rockstar accidentally got an interactive, thrust-by-thrust sex game in San Andreas, the FTC promised the concerned that they'd "look into it." And now, one year later, 1UP is promising that a report on whether or not Rockstar deceived the ESRB is expected soon.

Let's hope common sense prevails. Although there is a valid point that Rockstar's Hot Coffee mini-game went beyond titillation into quasi-pornography, the fact remains that it is a mod and companies should not be forced to disclose to the rating boards every asset in a game that some intrepid hacker may be able to fish out of the source. Although I have to admit, the fallout from Hot Coffee was good for me, as a gamer: it got Rockstar to release a second version of the PS2 game with that stupid bugged Zero mission

We'll let you know when the report from a bunch of career hypocrties comes in. FLORIAN ECKHARDT

FTC's Findings on GTA Forthcoming [1UP]