Breaking: Take-Two, Rockstar Settle FTC Charges

June 08, 2006 | By: James Brightman

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The FTC alleges that the companies' game content claims were deceptive. Rockstar and Take-Two have reached a settlement with the FTC that requires them to "establish, implement, and maintain a comprehensive system reasonably designed to ensure that all content in an electronic game is considered and reviewed in preparing submissions to a rating authority." The companies' will be subject to fines of $11,000 per violation. [Update: Take-Two CEO responds]

[UPDATE] A seemingly pleased Paul Eibeler, Take-Two's chief executive, told the Financial Times, "We look forward to putting this behind us and concentrating on what we do best, creating interactive entertainment."

The Federal Trade Commission (FTC) has today announced the results of its investigation into the infamous "Hot Coffee" scandal involving Rockstar Games and parent company Take-Two Interactive.

According to the FTC, Rockstar and Take-Two did indeed deceive consumers with the release of GTA: San Andreas. "... the companies, in advertising the Entertainment Software Rating Board ('ESRB') rating for the game, did not tell consumers that the game discs contained potentially viewable nude female characters and a potentially playable sex mini-game."

The two companies and the FTC have reached a settlement, which the FTC has outlined as follows:

"The proposed consent agreement with the FTC requires Take-Two and Rockstar Games to clearly and prominently disclose on product packaging and in any promotion or advertisement for electronic games, content relevant to the rating, unless that content had been disclosed sufficiently in prior submissions to the rating authority. In addition, the companies cannot misrepresent the rating or content descriptors for an electronic game. Finally, the companies must establish, implement, and maintain a comprehensive system reasonably designed to ensure that all content in an electronic game is considered and reviewed in preparing submissions to a rating authority. Once the order becomes final, the companies will be subject to civil penalties of up to $11,000 per violation if they violate the order. The companies will be subject to compliance reporting requirements to ensure that they meet the terms of the order."

When voting on the consent agreement, the Commission approved it 5-0. The FTC will decide whether to make the agreement final sometime after July 10.

"Parents have the right to rely on the accuracy of the entertainment rating system," commented Lydia Parnes, Director of the FTC's Bureau of Consumer Protection. "We allege that Take-Two and Rockstar's actions undermined the industry's own rating system and deceived consumers. This is a matter of serious concern to the Commission, and if they violate this order, they can be heavily fined."

According to Take-Two, the publisher has already incurred a loss of $24.5 million due to the "Hot Coffee" scandal, subsequent re-rating of San Andreas, and removal of the game from most retailers' shelves (until it was replaced with the M-rated version). It'll be interesting to see how Take-Two addresses the latest FTC development when it releases its Q2 fiscal results.