Facing Regulatory Heat, GREE Apologizes, Pledges Refunds After Over-Charging Minors

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About a year after it faced regulatory scrutiny for certain kinds of game mechanics, GREE said today that it accidentally overcharged minors in some of its free-to-play games. The Japanese gaming company, which has a market cap of $3.8 billion, said it charged several hundred minors more than the legal limit of 5,000 yen per month for players under 15 years of age and 10,000 yen per month for players between 16 and 19.

The amount is pretty negligible — about 733 people were affected and the total amount was 28 million yen or about $322,000. Still, the incident shows how sensitive the company is as it battles a public image problem in its home market of Japan.¬†GREE’s shares have suffered over the past year as tighter government scrutiny of free-to-play game mechanics has hurt the company’s profitability. The company’s shares have fallen about 43 percent from a year ago, as the government cracked down on kompu gacha, a slot-machine like mechanic that awards players items in a mobile game. If they collect them all, they get a grand prize.

The crackdown affected GREE more dramatically than its rival DeNA. After posting several quarters of uninterrupted growth, the company’s profits actually declined year-over-year by 4 percent in the most recently reported quarter.¬†This was because it could no longer rely on lucrative kompu gacha mechanics and because of the costs of the company’s expansion overseas, which has involved the $210 million acquisition of Funzio and the $104 million deal to buy OpenFeint.

GREE said the error was discovered through a routine customer service check and that they’re fixing the software to prevent this from happening in the future.