Last month, we wrote about a new landmark California law, AB2426, that prohibits the use of words like “buy” and “purchase” in connection with advertising and selling digital goods. It has not yet been a month since Gov. Gavin Newsom signed AB2426 into law, and already sellers are taking steps toward compliance. 

Refresher

California AB2426 expands the scope of false advertising laws in California, making it unlawful for sellers to advertise or offer any digital goods using the words “buy,” “purchase,” or any other word that would lead a reasonable person to think they have an unrestricted ownership interest in the digital item. However, the law does not apply to sellers of digital goods who either: 

1. receive an affirmative acknowledgement from purchasers at the time of the transaction which includes: (i) that purchaser is receiving a license to the digital goods, (ii) a complete list of restrictions/conditions of the license, and (iii) that access to the digital goods may be revoked by seller if seller no longer has a right to the digital goods, OR
2. provide a clear and conspicuous statement prior to completing a transaction which includes: (i) a plain language statement that buying/purchasing a digital good is actually a license and (ii) a hyperlink or QR code to access full terms and conditions of the license. 

Additionally, the law specifically exempts digital goods that are subscription-based services, free (e.g., “no monetary consideration”), or are made available through permanent offline download to an external storage source and can be used without connection to the internet.

Why It Matters

In light of AB2426, Steam (a popular PC game distributor operated by Valve) has begun updating its checkout process, which now includes a disclosure regarding these licenses and a link to Steam's terms. The new notice appears in users' shopping carts prior to checkout, stating “A purchase of a digital product grants a license for the product on Steam. For full terms and conditions, please see the Steam Subscriber Agreement.”

AB2426 poses a unique problem within the videogame ecosystem. For developers and publishers, compliance will be complicated as they will need to rely on games distributors if they wish to be exempt. While game developers and publishers may have control over the marketing of their games, few have direct control over the user experience during distribution – yet nearly all games are subject to both the distribution platform's terms and the developer or publisher's end-user license agreement. Therefore, to obtain the “full terms” of any game license, a purchaser must look in two places.  

Further, games that can be purchased via physical discs are not entirely exempt either. While some games may qualify under the permanent offline download exception, games which rely on or otherwise require an internet connection to play may still be captured by AB2426.  

What Comes Next

In short, AB2426 compliance is still an ongoing conversation within the games industry. The law takes effect on January 1, 2025 – a date which is rapidly approaching. Penalties for violations of the law are relatively broad, including injunctive relief and civil penalties of up to $2,500 per violation. Under California law, affected purchasers with standing may also bring a private right of action against violators. 

Steam is one of the first companies we are aware of to take steps to publicly comply with AB2426. We will undoubtedly see more. In the meantime, we will monitor both regulatory guidance and compliance efforts closely.