Donate Games is a charity that works a bit differently than most. While other charities have had players donating games to entertain sick children, Donate Games is a fully-functioning games trade-in service. Players can send their used titles in exchange for a tax-deductible receipt, or they can purchased used games via the charity's website, with all proceeds going towards helping children affected by and raising awareness of orphan diseases.

Orphan diseases are those that affect less than .05% of the population, and therefore don't get the sort of attention more prevalent disorders do - diseases like Chordoma, Progeria, and Rett Syndrome.

"Our user-friendly model takes charitable giving to a whole new level of fun and interactivity, presenting families with a unique way to extend their holiday generosity," said Jim Carol, CEO and founder of Donate Games, who founded the charity after his own son and video game enthusiast, Taylor Carol, survived an orphan disease. "We've streamlined the process of raising rare disease support for hurting children who need our attention-and deserve our kindness during this season of giving. Donate Games, save lives. It's that easy."

So if you are looking for a Christmas present or simply in mood to browse the used bin at your local game store, stop by DonateGames.org first. The prices are nice, and the warm and fuzzy feeling comes free of charge.

The wannabe-lawyer in me wants to note that they don't say "case" and, as you know, there are variances in case design among the 360 (green), Wii (white) and PS3 (clear, and the art format is shorter and slightly wider.) But they also guarantee that the game arrives "packed with love." Which is kind of awwwww or ewwwww depending on how you want to view it.

This is not applicable to in-store used games where, of course, if cover art and manual matters to you, you can like verify its existence before you buy. Further, it concerns 360, PS3, Wii, DS and PSP games only, not PS2, not GameCube, etc.

GameStop - Pre-Owned Guarantee [GameStop via Blast Magazine]

We checked with four online retailers and online shopping services to see how their prices compared to the ones found in the online Playstation Store. The results? A little surprising.

With only half of the top-rated Playstation Portable games (shown in order of ranking) currently available online, it's hard to do a meaningful comparison. It is interesting that the inability to find a particular used title can drive up the price in a store, but doesn't seem to impact its price online.

While the difference for many of the available games online often isn't substantial, the Playstation Store's relatively high price for a game like Wipeout Pure, which has been around for awhile and will run you nearly half the price in a store, is troubling.

Methodology: We used Gamerankings.com to find the 10 highest-rated games on the Playstation Portable. Prices were checked Sunday night. For used games we used the "like new" condition prices when available or "very good" condition when the service didn't include like new as an option. In the case of Google, we used Google Shopping to find the best price of a used title from a retailer.

"So you got 20 points of their sales that wouldn't happen unless we had a trade business going," Mondhaschen said.

He also said that used games drive sales in DLC.

When 'The Lost and Damned' came out we started selling a whole lot more Grand Theft Auto IV, both on the new side and on the used side. Which, then, sort of funds people's ability to go play L&D again. And then the trade business funded all those L&D cards that showed up in stores.

It is one way to look at it, and as a consumer, I certainly enjoy the ability to sell games I've played, sometimes for substantial value. But the larger picture must also factor in those who do not buy new games at release, preferring to pick them up a month or so later. There must be a study that's isolated and quantified that consumer behavior, right?

The Game Crazy Interview [IGN via MTV Multiplayer]

Yes, the Toys R Us trade-in program differs from many of their competition in that there is no cut-off point when a game is too old to be traded in. As long as the customer supplies the original game in the original packaging, they can exchange their games for store credit good at Toys R Us and Babies R Us stores, along with the corresponding online outlets.

"The video game trade-in program is another way we're providing customers with additional value when they visit our stores," said Bill Lee, Vice President, Divisional Merchandise Manager, Toys"R"Us, U.S. "This program is designed to make the exchange process completely hassle-free for customers by accepting games from even the oldest systems, including the original Atari 2600 and 32-bit Sega Genesis."

Outside of the odd vintage video game shop and online outlets like eBay, there really aren't many places you can take your old Intellivision, NES, or Sega Genesis games for store credit. Depending on the reaction to the program, this could make the Toys R Us used video game section a very interesting place to shop, with games we've not seen in ages popping up on store shelves.

As if I needed more of an excuse to visit Toys R Us.

Update: Just got a message from a Toys R Us representative explaining that the games will not be going up for resell in Toys R Us stores. "The games will be collected by a third party that will then resell the games to retailers across the country."

That's a missed opportunity right there.

"I expected we'll see a PlayStation 3.5 before we see a PlayStation 4 and an Xbox 560 before we see an Xbox 720," Rich Hilleman told Dean Takahashi and VentureBeat."The biggest shift is how fast packaged goods games are changing and going away."

That means online distribution. And by that, he means mobile gaming, and delivery of mobile games. Hilleman pointed out that with the DS, PSP and PSPgo, and iPhone, mobile units outnumber consoles two-to-one. The iPhone especially is part of the "democratization of game development," both increasing competition for EA, but also lowering development costs.

On the console side, Hilleman blameed piracy and used sale for what he says is the end of games' long tail. But, he said, markets like Korea show there's plenty of growth upon which a corporate behemoth may feed.

"If I want to go to see the past of gaming, I go to Japan," Hilleman told Takahashi. "If I want to see the future, I go to Korea." There, he says, are 28,000 parlors where Internet gamers pay by the hour, and the establishments reap high margins off of concession sales. Hilleman also pointed to Webkinz as a forward-facing brand, less so Burnout, where 2:1 ratio of users to games sold makes apparent the influence of used sales and piracy to a publisher's bottom line.

Also of interest in this piece: Takahashi's back-of-the-envelope calculations based on the idea that EA typically spends two or three times as much on marketing and advertising as it does on developing a game.

That's because advertising is critical to getting a game in the top ten rankings. If you have a $10 million game, don't be surprised if the the TV advertising costs drive the ad budget to $30 million. If a $60 game yields revenue of $35 for EA, then (according to my math) the company has to sell 1.1 million copies just to break even.

EA'S Chief Creative Officer Describes Games Industry's Re-Engineering [Venturebeat via Blue's News]

The idea to research the subject of how game resellers priced their titles came after a visit to a local GameStop store. Browsing the used PlayStation 2 section, I came across used copies of Tecmo's Fatal Frame trilogy, which I had long wanted in my collection. I quickly snagged all three, only to be taken aback by the prices.

Though I was standing in front of two bins filled with $.99 to $9.99 PS2 titles, these three games were marked $39.99 apiece. I still walked away with Fatal Frame 2 and 3, both of which were in pristine shape, but it left me curious as to how, out of all the PlayStation 2 titles, GameStop decided to mark these three in particular at price approaching the original manufacturer's suggested retail prices.

I decided to contact various retail and online video game resellers to help shed a little light onto the process behind pricing used titles.

GameStop was not available to comment on this story.

A Secret To Everyone

Upon making my initial inquiries, I found myself repeatedly running into a stumbling block: Secrecy.

Used games are big business. At the core of this business is a simple economic concept -– buy low, sell high. When a new game is released, the price is generally fixed. The profit margin -– the difference between what the retailer pays and what the customer pays -– is relatively low. With a used title, retailers can essentially dictate their own profit margin, as long as customers perceive the value of buying and selling used merchandise at the set prices.

Since new prices are relatively fixed when a game is released, the pricing of used titles is an important weapon in the video game retailer's arsenal. Madden 10 might be the same price everywhere new, but if a customer can get a used copy at one store $5 cheaper than at another, that could be the impetus that drives that customer to return.

With so much riding on used sales, it really isn't a wonder that many companies weren't willing to share such sensitive data with the press. It's not that they don't want the consumer to know as much as they don't want to give the competition a leg up.

Despite this, several retailers did take the time to explain how their specific processes work.

Supply and Demand: It's the Law

Marc Mondhaschen, Director of Used Games at specialty retailer Game Crazy, explained a fundamental economic process behind the pricing of used games.

"Pricing in terms of trade value is all a supply and demand equation," he said. "There are games that are hard to find that don't sell very well, and there are games that are easy to find that sell extremely well."

It's a process you can see in practice at any retail location that deals in used titles, especially around this time of year, when Madden 10 has just hit store shelves. You'll find large numbers of Madden 09 marked down substantially, due to the fact that customers are trading in copies of the game to help finance the latest version. No one wants Madden 09 anymore.

In comparison, look at a game like 2007's Halo 3, which is still one of the most played titles on Xbox Live nearly two years after its release. Being a definitive game on the platform, and one that players are normally reluctant to part with, a used copy is priced at most retailers some $15-20 more than Madden 09.

It's these same supply and demand principles that affect a game's price based on rarity. When Game Crazy sees that a used title is selling out immediately and not many copies are coming in, the price goes up, however some retailers do take at least a cursory look at market-wide rarity when pricing hard-to–find titles.

"The secondary market (eBay) does factor in, just as an idea of what things are going for," explained Daniel Magano, a representative from online retailer e-Starland who spoke to Kotaku regarding his company's used game pricing. "But the main factor is the supply and demand – what we are able to get in."

Algorithms: By the Numbers

It sounds simple, but there's some powerful technology behind many of today's used game retailers' pricing strategies. One word the gets tossed about a great deal is algorithm – a step-by-step mathematical problem-solving procedure, or in layman's terms, number crunching. In the used games business, this means complicated computer software that tracks the various factors involved in order to produce a price for both trade-ins and used sales that makes sense.

Of the companies I spoke to, each had their own proprietary software that aids in setting used game prices. In the case of Wal-Mart's trade-in kiosks, a representative from kiosk operator e-Play explained that their software runs as often as once a day, transmitting new pricing information to participating Wal-Mart locations on a regular basis.

According to a Best Buy PR representative, e-Play is the company behind its trade-in kiosks as well. "Our vendor, ePlay, has set up a formula for trade-in at our kiosks. We also do online trade-in where we have developed a similar formula depending on game and quality of the product."

e-Starland's software is even more impressive, constantly calculating new prices based on the information provided by their website, right down to what product pages customers are visiting.

"We have proprietary software that gauges demand based on a number of factors, based on how many people are looking at the product or are on the "Notify Me" list, and whether we can get in the game. Our prices change all the time…it's something we look at constantly," Magano explains." You can look at our website one minute, and then ten minutes later everything has changed. It's pretty much real-time, dynamic changes."

The Competition

With the ability to price more freely and the potential for used games to drive both sales and repeat business, it's no wonder that video game retailers are keeping a keen eye on the competition when it comes to setting used game prices.

"We have a 'More for Trades" guarantee, so we have to track what the bad guys (the competition) are pricing their stuff at from a trade perspective," Mondhaschen of Game Crazy said. "That will drive used pricing as well. If we see the bad guys are priced over us on any given trade value, we'll make sure we're trailing either at or over."

According to Mondhaschen, Game Crazy has a team dedicated to keeping track of the competition's prices, but the size of said team and how exactly they operate is a trade secret he could not share.

Competition can also affect used game prices in unexpected ways, as evidenced by the recent showdown in Utah, in which electronics retailer Best Buy began testing a program to price matched new games according to GameStop and Game Crazy's used prices. GameStop responded by significantly slashing used prices at their West Jordan store in what seemed like an attempt to make Best Buy's offer backfire.

This demonstrates yet another economic truth – competition is good for the consumer. When retailers fight, they're fighting for your dollar, and they aren't above letting you keep a few extra bucks in exchange for your patronage.

Finding The Final Fatal Frame

Despite the secretive nature of pricing used games, I did come away with a better understanding of the process than I started with, along with some advice on how to find the best prices on used titles.

Game Crazy's Mondhaschen offers up this tidbit of wisdom: "If you want to buy a used game, the best way is to wait as long as you can stand to, as prices fall over time." It may seem obvious, but it's a good point. If you don't feel a mere $5 is enough of a discount on a used copy of a new release, then wait.

And my personal advice? Shop around. If a price seems too high at one retailer, then check out several before making your purchase. After leaving the $40 copy of the original Fatal Frame at GameStop, I came home and checked out prices at various stores online. Here are the prices I found for a used copy of Fatal Frame for the PlayStation 2.

GameStop: $39.99
Amazon: $29.97
eStarland: $38.21
eBay: $32.98

As you can see, prices vary wildly, with a spread of over $10. That can make a big difference for the budget-conscious gamer. So where did I buy my used copy? I didn't. Amazon.com had new sealed copies on sale last week for $19.99 apiece, so instead of paying $40 for a disc in a blank case, I got a brand new copy for half the price.

Don't assume that "used" means "less expensive." Intricate algorithms, sales tracking, market analyzing, and super-secret procedures might be well-suited to determining used game prices, but it takes a savvy consumer to discover where the real bargains lie.

The first piece is "The Stone Prisoner" download pack, a pre-order incentive that grants players access to Shale, a "mighty stone golem who can become one of the most powerful party members in the game" and new environments and items. Don't pre-order or buy new? It'll cost you $15.

The other is the Blood Dragon Armor, an "exclusive set of themed armor" that can be worn in Dragon Age: Origins and Mass Effect 2. Finally, there's the Memory Band, an in-game item that grants "+1% to all gained Experience Points and which adds one bonus point that players can use to boost their character's skill set."

EA really, really doesn't want you to buy this used.

These prices come from a West Jordan, Utah area GameStop, the same location that Best Buy is testing its "buy new games at used prices" plan. The deals are fantastic, slashing $10 to $15 off GameStop's regular used prices for most of these titles, including relatively new releases like Red Faction: Guerrilla, Prototype, UFC 2009 Undisputed, inFamous, The Conduit and Fight Night Round 4.

In fact, those price drops on used games affect dozens of titles, prices that would make it unattractive and unprofitable for Best Buy to continue with its plan. The real attraction here is for the West Jordan, Utah gamer, who can probably snap up new copies of tons of games at below wholesale prices.

According to the flyer that we were forwarded by Kotaku reader Corvus, these prices are in effect at the West Jordan GameStop only until August 31. If you're in the market for just about anything, might be worth heading to GameStop and grabbing one of these flyers, Utahans.

Here's the flyer, which apparently does not reflect all price drops at the West Jordan GameStop.

One Cheap Ass Gamer snapped this photo highlighting the promotion at a West Jordan, Utah area Best Buy. The offer boasts that the store "now price matches NEW video games at USED prices from Gamestop or Game Crazy." GameStop's used pricing tends to be about $5 less than the retail price on new releases, a decent savings on brand new games, but not out of line with pre-existing deals offered by Best Buy.

We're currently waiting to hear back from Best Buy on the finer details of the promotion. It's not clear how many of Best Buy's retail locations are offering this price match guarantee. Obviously, we'll let you know if this is just a test and just how this program will work.

If this policy rolls out at Best Buys nationwide, it's possible that it could impact GameStop and Game Crazy's used game sales business, but maybe not as substantially as some might hope.

Best Buy Price Matching New Games at Used Prices from GameStop and Game Crazy [Cheap Ass Gamer]

The Value Gamer: Play and Purchase Behavior in a Recession also shows that gamers have increased their purchase of used games to "record-breaking totals" since Nielsen began tracking used game sales.

"Overall, the uncertain economy has not hurt gameplay and may have accelerated it as gamers look to get more value out of the games they own," The Nielsen Company says.

More interesting, I think, is what type of gamers Nielsen seems to think is driving this increase in play.

"Primarily, we believe mainstream gamers are playing more of the broadly appealing games (i.e Wii Fit, Guitar Hero and Rock Band) pushing their hours of gameplay up," said Michael Flamberg, director of client consulting, Nielsen Games. "The social aspects of these games have engaged them. We don't believe hardcore gamers are driving up the usage averages we've observed. Second, gamers may be looking to stretch their entertainment dollar further through playing games they own more. The importance of value for them is evident in the findings on used game purchase."

Gamers are also making more use of rental services like Gamefly, according to the survey.

The results seem to show that developers need to continue to concentrate on making ways to extend the life of their games if they want to increase sales and lengthen the time a person holds on to a title. New downloadable content, episodes and, of course, strong multiplayer elements all seem to help that.

The Value Gamer: Play and Purchase Behavior in a Recession [Nielsen]

In a 210-page annual report about the state of the gaming industry that begins with him thanking Kotaku and other websites for "keeping us on our toes and always asking us to think about the industry in real-time," Wedbush Morgan Securities analyst Michael Pachter sized up the used games industry.

And then Pachter argued why used games aren't the danger game publishers suspect them to be.

On the size of the phenomenon, he stated:

The number of games traded annually is striking; we estimate the overall used game market to be $2 billion in the U.S., with an average ticket of around $20 per used game. This means that an estimated 100 million units of used games are traded in each year, representing around 1/3 of all games sold annually.

A third — or a quarter if the 270-million games sold annually in the U.S. also cited by Pachter doesn't include used games — of games sold annually in the U.S. are used? That is a striking figure, either way you look at it. Kotaku contacted GameStop and the game sales-tracking NPD group for corroboration, but neither replied by press time. The $2 billion figure was reported earlier this year by the Wall Street Journal, citing another analyst.

If that market is so big, why shouldn't publishers, who derive no profits from the sale of used games, be shaken by it?

His analysis:

we think that used game sales benefit new game sales by providing currency to gamers with less disposable income, thereby enabling the purchase of additional games. The vast majority of used games are not traded in until the original new game purchaser has finished playing, typically well beyond the window for a fullretail priced new game sale. Thus, while there may be some limited substitution of used game purchases when GameStop employees "push" used merchandise upon consumers lined up to buy new games, the vast majority of used game purchases occur more than two months after a new game is released. Other than the potential impact at holiday (when new game lives are extended beyond the typical two month sell-through pattern), used game sales just don't impact new game purchases very much…. To the extent that there is a substitution effect, we estimate that fewer than 5% of new game sales are impacted

Pachter's analysis echoes what GameStop reps have told me about a view of the sale of used games furthering the purchase of new games, rather than cutting into such sales. As Pachter notes, many publishers have been acting as if the threat is real, bundling their games with map-pack codes and other add-ons that add value for the first purchasers of a given game disc.

Pachter argues that the ability for gamers to sell their newly-bought games back to GameStop and other retailers for store credit is one of the factors limiting consumer interest in downloadable games. Used games keep them coming into stores and keep the trafficking in new game purchases. Consumers, he writes, perceive less value in the purchase of a digital game that they can never sell back.

[PIC]

GameStop addressed Best Buy's plans at their annual shareholders meeting in Southlake, Texas on Tuesday, explaining that their years of customer service give it the winning edge over cold, calulating machines.

"GameStop understands that trading in used games and consoles is a highly-assisted activity," the company said. "We are very confident in our business model that allows our expert associates to help consumers trade in product, a fact not addressed with a self-serve process."

Of course, the expert associates generally don't do more while trading in then look at the games and tell you the price you'd be getting, which is what the kiosks themseves do, but this is beside the point.

The point here is that GameStop isn't afraid of Best Buy. They aren't afraid of Amazon. And if you start accepting game trade-ins, they more than likely won't be afraid of you.

GameStop is unfazed by new rival in used-video-game market [Star-Telegram.com]

Video game specialty chain GameStop may have the lion's share of the used market currently, but the vultures are definitely circling. This week, several Best Buy locations in Austin and Houston Texas will be testing game trade-in kiosks, which allow customers to automatically trade their used video games for store credit without the need to clog up cash registers with complicated transactions. The machines work much like the ones Wal-Mart is testing in their stores, checking the discs for readabiity before accepting them. The main difference here is that instead of simply charging money back to a credit card, a process which takes 3-4 business days, the Best Buy machines will actually issue a Best Buy gift card, instantly redeemable towards anything the store carries.

Along with the kiosks, the selected stores will also begin selling used games as well, perhaps gaging how they fare against more traditional retail outlets.

The news comes by way of a blog post from Best Buy CMO Barry Judge, who explains the move towards used games is all about value and choice...and passion.

We're excited about this test, especially because we know how deeply passionate our customers and our employees are about gaming, movies and entertainment overall. And the trade-in and used value propositions will give those passionate customers even more choice and value at Best Buy.

With Wal-Mart's rather convoluted used game solution, Best Buy is currently looking like the best bet to peel off some of the used game business from GameStop. Not only will the kiosks provide instant gratification in ways that Amazon and Wal-Mart are not, it's all done without having to stand in a long line and dealing with a GameStop employee. I love my friends who work at GameStop, but if I can get similiar values without having to bug them, then that's what I would likely do.

New Places and Spaces - Used Games Launch [Barry Judge - thanks Jim!]

According to a GameStop manager who forwarded us details of that internal e-mail, the company is altering one of its more aggressive sales tactics, one which prompts employees to offer a used version of a new title brought to the sales desk. The GameStop Point of Sale system is said to no longer prompt employees to push that used copy for 60 days after the game's initial release.

That change was described as part of an agreement to "improve vendor relations."

Publishers, developers and press have gone on record saying that they're not a big fan of used game sales, and while the change doesn't stop an employee from selling a used copy of a game before the two month mark, it might at least help perception.

We've contacted GameStop corporate to learn more about the supposed change.

[Image Credit]

This is a question raised by Pixel Equity, a new non-profit organization dedicated to getting video games and consoles into the hands of children at youth centers who might not be able to play games any other way. I know it's hard for some of us to imagine that such children exist, but it's true, and Pixel Equity wants to help.

"Video gaming is a fun activity, but with consoles costing hundreds of dollars, many children just can't afford to play," according to Matthew Badalucco, the founder and Executive Director of Pixel Equity Inc. "As a lifelong gamer, I want to address this aspect of the digital divide."

I particularly like the reasons that Pixel Equity gives for wanting to share games with underprivileged children, citing that our hobby helps develop understanding of other cultures, teaches children to think scientifically, and helps develop social and communication skills. It's a wonder we ever did any other this before video games came along!

How can we help? For one, Pixel Equity has just launched their official website, where gamers can donate specifically requested consoles and games, or simply donate a little bit of cash towards purchase.

Alternatively, Pixel Equity will also take used games and consoles not specifically requested, adding them to a library that youth centers will be able to draw upon when needed.

It sounds like a lovely cause, and even games that retailers wouldn't give you five cents for are new, exciting experiences for those who have never played. Check it out, unless you are one of the folks think they've suddenly discovered a way to finally offload those Burger King Xbox 360 games you've got gathering dust on your shelf. There's a special ring of hell reserved for you people.

PIXEL EQUITY : THE COMMUNITY GAMING INITIATIVE [Official Website]

Despite the unstable economy, GameStop once again delivers a report indicating record sales and earnings for the first quarter 2009. Sales were up 9.2% compared to this time last year, with $1.98 billion dollars worth of product passed to consumers. Net earnings were up 13.4%, rising to $70.4 million from last year's $62.1 million.

Great news for GameStop, though not so good for the games industry as a whole, as new game sales declined and used games jumped significantly.

"During the quarter GameStop sustained its strong earnings growth momentum and exceeded earnings guidance despite less than planned comparable store sales," indicated Daniel DeMatteo, CEO of GameStop. "Although new video game software sales declined by 2.8%, lower-priced used products grew a robust 31.9%, illustrating that value is becoming more important to our customers.

So yes, great for GameStop, which receives the full benefit of used sales, but not so good for companies releasing new games to the market. Of course it's been a little slow for new games this year so far, and DeMatteo expect things to pick up as the year rolls on.

"In the second quarter, like the first, we face very strong comparisons to the prior year period due to the unprecedented number of blockbuster titles released in the first half of 2008 and a significantly more brittle global economy. We do expect the back half of this year to be stronger than the first half due to a full and wide-ranging new title lineup. All together, this places us in a prime position to capitalize on the growth in the market in the fall and holiday seasons."

Despite DeMatteo's optimism, a slightly-lowered forcast has stock prices slipping today, meaning it might be a good day to buy...or sell, depending on your own particular risk-taking tastes.

Mark Methenitis, an attorney at Dallas-based The Vernon Law Group, says that there is both a legal and pragmatic approach to the answer of whether the practice is illegal.

"From a legal standpoint, ignoring any pragmatic analysis, it certainly seems that way from the letter of the law. Certainly, it's something the FTC could investigate, but more practically, it may be a matter for state deceptive trade practices law. In Texas, for example, it is a deceptive trade practice if you are "representing that goods are original or new if they are deteriorated, reconditioned, reclaimed, used, or secondhand."

That matches up with our research on the subject and interpretation of the FTC rules as it applies to GameStop. We think that the retail's behavior would violate the FTC Act (15 U.S.C §§ 41-58). If so, the FTC could issue an injunction and/or fine Gamestop.

The FTC Act Test for false advertising states that there must be a representation, omission or practice that is likely to mislead the consumer. Second, the FTC examines the practice from the standpoint of a reasonable consumer. Finally, the representation, omission, or practice must be a "material" one (whether the act or practice is likely to affect the consumer's conduct or decision with regard to a product or service).

In GameStop's situation, it sounds like the employees have mislead the customer by representing that the game is new and omitted the fact the game has been used. A reasonable customer would not pay full price for a used game; the representation or omission would affect the customer's decision; and therefore, the representation or omission is material and would constitute false advertising.

In his article, Methenitis goes on to point out that the law doesn't exist in a vacuum, adding that he's not sure that GameStop is as nefarious as many people seem to think it is.

His conclusion? Why doesn't GameStop just use reproduced cover art instead of gutted games for display purposes? That would do away with the need to open games. Of course, it would also do away with one of the biggest fringe benefits that GameStop employees get: Free game rentals.

If you're interested in the issue, and not just endlessly arguing about it, Methenitis' well-reasoned story is worth a read.

It's also worth noting that in 2003, GameStop reached a national settlement in a class action filed against them for reselling games that had been purchased and then returned, as new. The practice was deemed a violation of state consumer protection law.

GameStop's Employee Checkout and Deceptive Trade Practices [Law of the Game, thanks Mark]

Thanks to Jesse Ma for additional research for this article.

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.

Richard Thornhill purchased two used Grand Theft Auto titles from a Gamestation store in Cheltenham on Sunday. Upon opening one of the game boxes, a cling-film packet dropped from between the pages of the game manual containing four ecstasy pills, which he promptly brought to the local police station. Thornhill shudders to think what could have happened if his 12-year-old son or 16-year-old daughter had found the pills.

"I have two children and my son plays Xbox all the time. He could easily have opened the box and found them. I dread to think what the consequences would have been if he had. He is only 12. He could have died."

Of course any 12-year-old should know not to eat random pills they find inside video game boxes, but that's beside the point. The point here is that Gamestation sold a man a video game with psychedelic drugs inside it. How does that happen? Gamestation said:

"We have rigorous procedures for accepting pre-owned titles and checking them before they are put back on sale. We have launched an immediate investigation and we will work closely with police to find out what happened in this instance.

Anyone who has ever traded in a game at GameStop knows full well that they never, ever check the game manuals. One could theoretically print out a bunch of porn from the internet, wrap the game manual's cover around it, trade in their used copy of Animal Crossing, and then wait for the headlines to appear. Not that I am suggesting anyone try that, of course.

Somewhere in Gloucestershire a raver is completely kicking themselves right now.

Father of boy, 12, finds ecstasy tablets in video game manual [Telegraph via Game Politics]