Pokémon Go Contracts Cause Concern for Regulators in Europe

German Group Threatening to Sue Niantic, Citing Data Laws Violation

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Gamers love Pokémon Go. The mobile app's developers, however, are finding European authorities a bit more difficult to win over.

The game has smashed app download records -- but consumer watchdogs across Europe are raising questions about the contract customers must agree to before using it. The terms of service waive a player's rights to courtroom representation as a plaintiff or class action member in favor of binding, individual arbitration unless the user opts out within a month of the download.

This month's release of the app that allows players to hunt Pokémon in their own backyards led to a frenzy with consumers and investors. Nintendo, creators of the Pokemon franchise and investors in developer Niantic, saw its market value double in the immediate wake of the game's release, surging by $17.6 billion. That boost has been tempered by questions about how much Nintendo will benefit, and whether groups will fight to improve the terms for consumers.

"I imagine most of the people using Pokémon Go would be pretty young, and they probably wouldn't even look at that," said Mark Woloshak, a dispute resolution lawyer at Slater and Gordon, referring to the contract. "It's not unusual for companies to have terms and conditions and then the circumstances change and the terms become unrealistic. It's understandable -- things move quickly."

The game inserts animated creatures into players' surroundings using real-time GPS data and phone cameras. Niantic's access to this level of user information has led to security fears, and so consumer groups are seeking assurances that users can assert their rights if a dispute ever arises.

The Federation of German Consumer Organizations has threatened to sue Niantic if it doesn't remove 15 rules from the contract by Aug. 9, saying they violate national data laws.

Within a day of its French release on Sunday, consumer rights group UFC Que Choisir called the game "very curious in terms of personal data, potentially costly, and even dangerous," also warning parents that their children could easily spend hundreds of euros on in-game purchases.

During its initial U.S. launch, the game incorrectly asked for access to iOS users' full Gmail and Google accounts, before rescinding the request in an update.

Niantic declined to comment on its contracts with consumers.

The free app has now rolled out in more than 30 countries -- and experts say the contract may contravene U.K., French and European Union statutes.

The U.K.'s Competition and Markets Authority, the government's market watchdog, declined to comment specifically on the game's contract, but highlighted several rules that would affect agreements.

British consumer laws limit pacts that hinder rights to legal action or force people to use dispute resolution outside the courts, the agency said. A spokesman was unable to reveal whether it has received any complaints about the app.

The French government's market regulator said any company whose terms have requirements included on a 2009 banned list could be punished with fines of up to 15,000 euros ($16,500) and overruled by injunction.

E.U. laws would also protect claimants. The Pokémon Go rules appear to clash with contract law, rules protecting legal jurisdictions, and a directive on unfair contract terms.

Mr. Woloshak said the U.K.'s consumer rights act would prevent enforcement of "unfair" terms on consumers, defining unfair as something that causes a significant imbalance in the rights and obligations to the detriment of the consumer.

If a user took Niantic to court over a data breach or other claim, the developer may find itself having to redraft the rules for subsequent users, Mr. Woloshak said.

"Niantic's clause seeks to limit the rights of the consumer and is consequently vulnerable in its entirety to being found unreasonable and therefore unenforceable," he said.

U.K. privacy concerns are exacerbated by the country's possible withdrawal from the E.U.'s General Data Protection Regulation, "probably the strongest data protection law in the world," according to Eduardo Ustaran, a lawyer specializing in cybersecurity at Hogan Lovells International.

"The main result of Brexit, as in so many areas, is much more uncertainty," said Paul Bernal, a privacy professor at University of East Anglia Law School. "As far as younger users of Pokémon Go are concerned, just as much uncertainty, I'm afraid -- though I think most younger users will just lie about their age."

Despite any legal or privacy worries, most people will continue to click straight through to catch their Pokemon for the foreseeable future.

"It's pretty scary," said Adam Rimmer, a 24-year-old modern history graduate who avidly plays the game, when told about the game's terms and conditions. "But to be honest, I would sign over my firstborn for Pokémon Go."

-- Bloomberg News