Japan: Social Networks Without Gambling

Authorities will prevent gambling on social networks

Consumer Affairs Agency in Japan has warned social gaming websites that it will clamp down on offerings that include elements of gambling, and it caused more than 20 percent decline of share prices of some prominent social gaming companies like Gree, Mixi shed, CyberAgent and DeNA.

The government's Consumer Affairs Agency is likely to inspect the mobile gaming industry over practices in which users pay extra fees for the chance to win special items in a practice dubbed "complete gacha", a system encouraging players to spend a few hundred yen at a time for a chance to win virtual "rare" cards, and winning additional prizes when completing a set of cards.

Social gaming is big business in Japan, only Gree's founder and CEO Yoshikazu Tanaka, one of only three billionaires in the region under the age of 35, holds 49 percent of the stock worth $1.3 billion, whilst the company boasts a market cap of $6.2 billion.

Kazuyuki Katagiri, an official at the consumer bureau, said: "We are investigating the 'complete gacha' case and whether it violates the law. And we are currently still reviewing in this direction." Therefore, the CAA will first contact with a warning the companies offering gambling-related products, and if they do not comply, the agency would send a cease and desist orders.

As far as Gree and DeNA are concerned, their spokesmen said they had not yet received notices from the government agency.

Yuki Nakayasu, a research analyst at Credit Suisse in Tokyo, assessed that average revenue per paying user of domestic social networking games totals around 20,000 yen ($250), adding: "The key point is that we do not know how much of a share the additional charges or 'gacha' contribute to revenue per user, but we do not think it is a small amount."

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