07-27-2005, 09:55 AM
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#61 (permalink)
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Junkie
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Update: FTC to investigate Rockstar Games
http://biz.gamedaily.com/features.as...feature&email=
Quote:
Tuesday, July 26, 2005
Hot Coffee-gate continues
FTC Gets Green Light to Investigate Rockstar Games
The House of Representatives has voted and approved a resolution urging the Federal Trade Commission to investigate Rockstar Games to determine if the publisher "intentionally deceived the Entertainment Software Ratings Board to avoid an 'Adults Only' rating." Could we see congressional hearings later this year over a video game? [UPDATE: Take-Two confirms investigation]
If you thought the controversy over the "Hot Coffee" mod to Rockstar Games' GTA: San Andreas was over once the ESRB completed its investigation and re-rated the game "AO," think again.
Rockstar deceived ESRB?
Earlier this month Senator Hillary Rodham Clinton (D-NY) requested that the Federal Trade Commission investigate Rockstar Games and parent company Take-Two Interactive. Late yesterday she may have gotten her wish as the U.S. House of Representatives voted overwhelmingly in favor (355 to 21) of H.Res.376—an FTC investigation "to determine if the publisher intentionally deceived the Entertainment Software Ratings Board to avoid an 'Adults Only' rating." It should be noted, however, that neither Senator Clinton's request nor the approval of the House resolution forces the FTC to investigate, but it does make it far more likely.
[ "Should the FTC determine that Rockstar Games deliberately misled the ratings board and consumers nationwide, they will pay the price," Congressman Fred Upton (R-MI) ]
House Resolution 376 was introduced by Congressman Fred Upton (R-MI). "I am outraged by the brazenness of Rockstar Games in their effort to do an end-run around the ratings system," said Upton . "Parental involvement is the most important line of defense in determining the type of content suitable for children, and the ratings system empowers parents to do just that. Unfortunately, Rockstar Games' deceit has severely undermined the integrity of the ratings system. What good are ratings that parent's cannot put their faith in?"
He continued, "I look forward to the FTC getting to the bottom of this matter. It is despicable that a company would go to such lengths to deliver smut to our kids. As a parent of two teenagers, I am particularly outraged... Should the FTC determine that Rockstar Games deliberately misled the ratings board and consumers nationwide, they will pay the price."
Analysts not too concerned
Although Take-Two has already taken a financial hit (estimates indicate a loss upwards of $50 million) because most retailers have pulled the now "AO"-rated San Andreas from their shelves, an FTC investigation could hurt the company even more, especially if it results in heavy fines and firings of key executives.
The news also put a damper on Take-Two's (TTWO) performance on the stock market as shares fell more than 7 percent at one point during trading today. That being said, many analysts believe it's an overreaction and that a "buy" rating should be maintained.
"While we believe the risk surrounding the Grand Theft Auto franchise and Take-Two remain high -- specifically related to the possibility of fines or loss of key personnel -- we think that the stock reaction is overdone and that shares appear cheap," noted Citigroup Smith Barney analyst Elizabeth Osur.
Wedbush Morgan Securities analyst Michael Pachter doesn't believe that the FTC will have a case against Rockstar/Take-Two because deceptive trade practices would have to mean that Rockstar showed intent, a false claim and harm to the consumer. Pachter doesn't think Take-Two management knew about the sex scenes hidden in the game.
"Yes, they [management] should have known because this is their flagship brand," he told TheStreet.com. "So to protect the franchise I think it would be appropriate for them to have better controls. [But] I really find it to be a stretch that the Federal Trade Commission is going to do anything about this."
We're still awaiting word from Rockstar Games for reaction on the House vote.
Update
Take-Two has now confirmed that the company is being investigated by the FTC. The full statement follows below.
"Take-Two Interactive Software, Inc. (NASDAQ: TTWO) announced today that it has been notified that the staff of the Federal Trade Commission's (FTC) Division of Advertising Practices is conducting an inquiry into advertising claims made for Grand Theft Auto: San Andreas. The Company intends to fully cooperate with the FTC inquiry, and believes that it acted in accordance with all applicable laws and regulations. The Company cooperated with a recently concluded Entertainment Software Rating Board (ESRB) investigation into this matter and has taken decisive and immediate corrective action.
"Grand Theft Auto: San Andreas, as originally marketed and sold, was intended for mature audiences -- those 17 and older -- and was labeled with five ESRB content descriptors: blood and gore, intense violence, strong language, strong sexual content and use of drugs. The title's M rating combined with the content descriptors reflected the game's mature themes. After it was widely reported that a third party modification could alter the retail version of the game on all platforms, the ESRB re-rated the title from "Mature 17+" (M) to "Adults Only 18+" (AO).
"Rockstar Games and Take Two Interactive regret that consumers may have been exposed to content that was not intended to be accessible in the playable version of Grand Theft Auto: San Andreas. The Company has taken significant steps to remedy this situation, including halting production of the current version of Grand Theft Auto: San Andreas, and has begun working on a version of the game that will not contain the elements used to enable the "hot coffee" modification. Going forward, the Company will refine the process by which it edits games and will enhance the protection of its game code to prevent such future modifications.
"Take-Two Interactive recognizes and takes seriously its responsibility to ensure that its games are rated and marketed appropriately. The Company will continue to support and promote the ESRB rating system to help keep mature-themed video game content out of the hands of children."
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