Special Disclaimer: This article is an original work by Attorney Shao Shiwei. It reflects only the author’s personal views and does not constitute legal advice or a legal opinion on any specific matter. For article reprints, legal consultations, or business exchanges, please add: sswls66
Introduction:
A publication license number (commonly known as a “banhao”) serves as the equivalent of a “birth permit” for video games. Under the Provisions on the Administration of Online Publishing Services, operating and charging fees for a game that has not obtained a game publication license may subject the operator to a series of punitive measures, including fines of up to ten times the illegal business revenue, website closure, and confiscation of illegal gains.
However, due to policy reasons in China, game publication licenses are strictly controlled. In recent years, only several hundred game publication licenses have been issued annually.
In light of this situation, many game developers have chosen to expand overseas as an alternative strategy, such as listing their games on comprehensive gaming platforms like Steam. Does this approach entail corresponding legal risks? This article provides an analysis.
Author: Attorney Shao Shiwei
01
Why is Steam permitted to sell to the domestic market?
Steam is a digital distribution platform for video games launched by Valve Corporation (commonly referred to by players as "V She"). The mainstream approach in the global gaming industry is a "rating system," while the "license plate system" is a phenomenon limited to a few countries. Listing games on Steam does not require a license plate, and there are no obstacles to selling games to domestic users through the platform. This is because such activities are protected by the relevant provisions of the Protocol on the Accession of the People's Republic of China to the World Trade Organization.
As a U.S. company (this concept excludes the Steam China platform), Steam has not entered the Chinese market; it merely provides payment channels such as Alipay and WeChat Pay, as well as Chinese-language pages, for Chinese users. According to the market access restrictions set forth in Item 2 of the Schedule of Specific Commitments on Trade in Services of the People’s Republic of China—List of MFN Exemptions, with respect to “Audiovisual Services · Distribution services of video recordings, including entertainment software (CPC 83202) · Distribution services of sound recordings,”Chinese users’ purchase of audiovisual service products on Steam is permitted by law.
02
Is it lawful for domestic game developers to list games on the Steam platform for Chinese players without obtaining a publication license?
For game development within China, failure to obtain a publication license means that the game cannot be launched for paid access, and the platform must not include recharge functions; otherwise, it will face the risk of administrative penalties. Consequently, many game developers choose to list their games on Steam.
Is this lawful?This first raises the issue of the extraterritorial jurisdiction of Chinese law.
The author previously discussed this in the article “Can a blockchain GameFi title launch without a game license number?” In criminal cases, jurisdiction is categorized as territorial jurisdiction, personal jurisdiction, protective jurisdiction, and universal jurisdiction. Therefore, in theory, Chinese judicial authorities have jurisdiction whenever a Chinese national commits a crime, the victim is a Chinese national, or the place of the crime is within China.
However, administrative penalties do not have such a broad scope of application; they apply only within China (including to foreigners and foreign companies that commit unlawful acts within China). If the conduct occurs abroad, administrative penalties cannot be applied.
Accordingly, if a game publisher’s issuance of a game without a license number is subject to administrative regulation within China, but the game isreleased on the overseas platform Steam, it will not be subject to administrative penalties for that reason.。
It should be noted, however, that in February 2021, “Steam China,” the platform jointly operated by Valve and Perfect World, officially launched in China.Games listed on Steam China still require a license number.。
03
Given the appeal of Steam, does this mean publishers no longer need to endure the arduous domestic queue for license numbers?
According to 2020 statistics from CompareCamp, Steam is the largest digital distribution platform for PC games globally, which suggests the vast number of titles available on the platform. In such a highly competitive environment, the likelihood of generating profits diminishes; however, if a game can be launched domestically, the potential earnings for game publishers would be significantly higher.
Furthermore, although from the perspective of statutory provisions, the legal risk for individuals located within China to publish games on Steam is indeed low, practical experience does not exclude the occurrence of extreme cases. We examine the following two recent cases:
Case 1: A Chinese programmer used unauthorized methods to bypass internet restrictions to work for an overseas company and logged into GitHub to accept company tasks. The Chengde Public Security Bureau determined that this constituted “unauthorized use of non-statutory channels for international networking,” imposing a fine of RMB 200 and confiscating illegal gains exceeding RMB 1 million.
Case 2: Li Moumou photographed clothing purchased from Pinduoduo, uploaded the images to Facebook, and sold the procured goods overseas. The Yangxin County Public Security Bureau imposed a fine and confiscated the illegal gains. The basis for this penalty was the same as in Case 1 above.
For domestic users who employ unauthorized methods to bypass internet restrictions to access overseas websites, engage in profit-making activities, and receive foreign exchange, relevant authorities may view such conduct as engaging in unlawful activities through illegal means. The legality and reasonableness of such penalties remain highly controversial.
Therefore, for game developers, even if you provide evidence demonstrating that your gameis not marketed or sold to the Chinese market, is not listed on the China region store, does not offer Simplified Chinese on its website, does not support domestic payment channels for in-app purchases, and employs technical measures to block IP addresses from mainland China,among other measures, it is still impossible to completely eliminate the risk of being subjected to penalties similar to those in the aforementioned cases.
04
Legal Counsel’s Reminder:
On September 23, 2021, the Audio-Video and Digital Publishing Association of China and the Game Publication Working Committee issued the Self-Discipline Convention on Anti-Addiction in the Online Game Industry (hereinafter referred to as the “Convention”). The Convention states that industry participants must “build a strong security defense line and resist harmful content, firmly resisting any attempts to bypass regulatory mechanisms by providing services to domestic users through overseas game platforms.”
Although Steam can be accessed within China without using unauthorized methods to bypass internet restrictions, users may experience network latency. To ensure a smooth gaming experience, domestic players still need to use “scientific” methods to access the global internet. This indicates that even if it is permissible for domestic users to purchase games on Steam, the Great Firewall of China still imposes certain restrictions on access to Steam.
Against the foregoing background, and based on an analysis of two recent cases, although current laws and regulations do not expressly prohibit domestic game developers from listing games without publication approval numbers on Steam, the possibility of administrative penalties cannot be absolutely excluded.
Furthermore, if the game content contravenes core socialist values and fails to meet the domestic review standards for game submission, and if the game company conducts promotional activities on relevant domestic social media platforms (which amounts to indirectly encouraging domestic users to bypass internet restrictions), there remains a risk of being implicated in other illegal or criminal offenses.
[1] Behind the 548 Publication Approval Numbers Issued in the First Half of the Year: Which Developers Emerged as Winners? Which Games Will Drive New Growth? https://mp.weixin.qq.com/s?src=11×tamp=1698058302&ver=4852&signature=FAYaxJ*4sFTRu*q6xAkF7dkaJwiQP*RPHTtgK8aAxSa*ITS0U0Tj0wc2K5BfULDfOYoR0yG6KoSrhpkZG1A1fflorpt7KcZDSLqFKR*VRaHwIazBaI5756*TaIMgiYeM&new=1
