To prevent fraud and deception in network recreational games.

January 7, 2003

Ms. KILPATRICK introduced the following bill; which was referred to the Committee on Energy and Commerce

To prevent fraud and deception in network recreational games.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the `Consumer Protection for On-Line Games Act'.

SEC. 2. FEDERAL TRADE COMMISSION RULES REQUIRED.

(a) IN GENERAL- The Commission shall prescribe rules in accordance with this section to prohibit unfair and deceptive acts and practices in the labeling and advertising of games of chance and games of skill offered by means of the communications networks by network game operators. Such rules shall--

(1) prohibit network game operators from making false, nonsubstantiated, nonverifiable, or misleading claims regarding--

(A) the fairness of any specific such game of chance or game of skill, or combination thereof played by the consumer;

(B) whether the game offered is a game of skill or a game of chance, or a combination thereof; and

(C) if the game offered is a game of chance, or a combination of skill and chance, whether all participants (including the game operator) are accorded equal or unequal chance; and

(2) prohibit such operators from displaying or advertising any seal or insignia attesting to the fairness of any game of chance or game of skill, or other matters described in paragraph (1), unless such seal or insignia has been awarded by a self-regulatory organization that complies with section 4.

(b) EVASIONS- The rules issued by the Commission under this section shall include provisions to prohibit unfair or deceptive acts or practices that evade such rules or undermine the rights provided to customers under this Act.

SEC. 4. ROLE OF SELF-REGULATORY ORGANIZATIONS.

For purposes of section 3(a)(2), a self-regulatory organization does not comply with the requirements of this section unless--

(1) the self-regulatory organization is registered with the Commission, by filing with the Commission an application for registration that--

(A) is in such form as the Commission, by rule, may prescribe; and

(B) contains the rules of the self-regulatory organization and such other information and documents as the Commission, by rule, may prescribe as necessary or appropriate;

(2) the Commission determines that--

(A) such self-regulatory organization is so organized and has the capacity to be able to carry out the purposes of this Act and to comply, and to enforce compliance by its members, with the provisions of this Act, the rules thereunder, and the rules of the self-regulatory organization;

(B) the rules of the self-regulatory organization are designed to prevent fraudulent and deceptive acts and practices, and, in general, to protect consumers and the public interest;

(C) the rules of the self-regulatory organization provide that its members shall be appropriately disciplined for violation of the provisions of this Act, the rules thereunder, or the rules of the self-regulatory organization, by expulsion, revocation of the authority to display or advertise any seal or insignia, or any other fitting sanction; and

(D) the rules of the self-regulatory organization provide a fair procedure for the disciplining of members; and

(3) the Commission has not revoked or suspended the Commission's determination under paragraph (2) with respect to such self-regulatory organization.

SEC. 5. ACTIONS BY STATES.

(a) IN GENERAL- Whenever an attorney general of any State has reason to believe that the interests of the residents of that State have been or are being threatened

or adversely affected because any person has engaged or is engaging in a pattern or practice which violates any rule of the Commission under section 3(a), the State may bring a civil action on behalf of its residents in an appropriate district court of the United States to enjoin such pattern or practice, to enforce compliance with such rule of the Commission, to obtain damages on behalf of their residents, or to obtain such further and other relief as the court may deem appropriate.

(b) NOTICE- The State shall serve prior written notice of any civil action under subsection (a) upon the Commission and provide the Commission with a copy of its complaint, except that if it is not feasible for the State to provide such prior notice, the State shall serve such notice immediately upon instituting such action. Upon receiving a notice respecting a civil action, the Commission shall have the right (1) to intervene in such action, (2) upon so intervening, to be heard on all matters arising therein, and (3) to file petitions for appeal.

(c) VENUE- Any civil action brought under this section in a district court of the United States may be brought in the district wherein the defendant is found or is an inhabitant or transacts business or wherein the violation occurred or is occurring, and process in such cases may be served in any district in which the defendant is an inhabitant or wherever the defendant may be found.

(d) INVESTIGATORY POWERS- For purposes of bringing any civil action under this section, nothing in this Act shall prevent the attorney general from exercising the powers conferred on the attorney general by the laws of such State to conduct investigations or to administer oaths or affirmations or to compel the attendance of witnesses or the production of documentary and other evidence.

(e) EFFECT ON STATE COURT PROCEEDINGS- Nothing contained in this section shall prohibit an authorized State official from proceeding in State court on the basis of an alleged violation of any general civil or criminal antifraud statute of such State.

(f) LIMITATION- Whenever the Commission has instituted a civil action for violation of any rule or regulation under this Act, no State may, during the pendency of such action instituted by the Commission, subsequently institute a civil action against any defendant named in the Commission's complaint for violation of any rule as alleged in the Commission's complaint.

(g) Actions by Other State Officials-

(1) Nothing contained in this section shall prohibit an authorized State official from proceeding in State court on the basis of an alleged violation of any general civil or criminal statute of such State.

(2) In addition to actions brought by an attorney general of a State under subsection (a), such an action may be brought by officers of such State who are authorized by the State to bring actions in such State for protection of consumers and who are designated by the Commission to bring an action under subsection (a) against persons that the Commission has determined have or are engaged in a pattern or practice which violates a rule of the Commission under section 3(a).

SEC. 6. ADMINISTRATION AND APPLICABILITY.

(a) IN GENERAL- Except as otherwise provided in section 5, this Act shall be enforced by the Commission under the Federal Trade Commission Act (15 U.S.C. 41 et seq.). Consequently, no activity which is outside the jurisdiction of that Act shall be affected by this Act, except for purposes of this Act.

(b) RULEMAKING- The Commission shall prescribe the rules under section 3(a) within 270 days after the date of enactment of this Act. A rule issued under this subsection shall be treated as a rule issued under section 18(a)(1)(B) of the Federal Trade Commission Act (15 U.S.C. 57a(a)(1)(B)).

(c) ENFORCEMENT- Any violation of any rule prescribed under subsection (a) shall be treated as a violation of a rule respecting unfair or deceptive acts or practices under section 5 of the Federal Trade Commission Act (15 U.S.C. 45). Notwithstanding section 5(a)(2) of such Act (15 U.S.C. 45(a)(2)), communications common carriers shall be subject to the jurisdiction of the Commission for purposes of this Act.

(d) ACTIONS BY THE COMMISSION- The Commission shall prevent any person from violating a rule of the Commission under section 3 in the same manner, by the same means, and with the same jurisdiction, powers, and duties as though all applicable terms and provisions of the Federal Trade Commission Act (15 U.S.C. 41 et seq.) were incorporated into and made a part of this Act. Any person who violates such rule shall be subject to the penalties and entitled to the privileges and immunities provided in the Federal Trade Commission Act in the same manner, by the same means, and with the same jurisdiction, power, and duties as though all applicable terms and provisions of the Federal Trade Commission Act were incorporated into and made a part of this Act.

SEC. 7. DEFINITIONS.

As used in this Act:

(1) COMMISSION- The term `Commission' means the Federal Trade Commission.

(2) NETWORK GAME OPERATOR- The term `network game operator' means a public or private business enterprise that engages in the business of providing game playing services (as opposed to the sale or download of a game as a publisher or distributor), either for a fee or for free, using a communication path between the player and the game operator that is part of a communications network.

(3) COMMUNICATIONS NETWORK- The term `communications network' means a public or private communication system that is used for the exchange of information or participation in transactions (or both) and includes systems such as the telephone system, cable systems, satellite systems, wireless systems, or the Internet.

(4) GAME OF SKILL- The term `game of skill' means a game in which there are few or no independent chance elements (such as die rolls, spinning wheels, drawn cards, or other random event generators) that substantially affect a game's outcome beyond the control of one or more of the players.

END