• Michalis Papachristodoulou

Taking the fun out of it: Loot box regulation and proposals

Having discussed how loot boxes often operate as gambling, it is time to look at how these might be potentially regulated. More than 80% of our readers thought that regulation is mandated in this area, yet the form of this regulation remains unclear. Any regulation must be balanced. It must only remove the elements of loot boxes that are inherently harmful to children and gamers, without inhibiting the creative freedom of game developers or removing the features that make loot boxes enjoyable to most gamers.

Outright prohibition

No major country has, as of yet, completely banned the use of the loot box mechanic in games, yet this does not mean that governments have stood idly by. Some EU states have passed legislation making loot boxes illegal if they fulfil certain criteria, such as the Netherlands. Under Dutch law, loot boxes are illegal if they are both available for sale AND the items received through them are transferable. The sale can be either for real world money, or even for in-game money if the game offers users the option of buying that in-game money. This prohibition covers a range of popular games, including FIFA, Counterstrike and Dota, who had to amend their games to remove one of the characteristics that would make their loot boxes illegal. Some removed the players’ ability to transfer the contents of loot boxes, whilst others made loot boxes unpurchaseable, keeping them in the game but only allowing users to earn them rather than buy them. In a sign of the chaning regulatory attitudes to loot boxes, the Dutch government recently decided to fine EA, the creators of FIFA, €250,000 per week until they change their loot boxes to comply with Dutch law.

Belgium followed a similar course of action. Citing the protection of children and the need to reduce gambling addiction, the Belgian Gaming Commission ordered game developers to remove loot boxes from their games. It threatened to bring criminal proceedings against individual game developers, whilst their companies would face fines of up to €800,000. Most game developers complied within the deadline, adjusting their loot boxes so that they would not fall foul of the Commission’s guidelines. Once again, a notable exception was EA. The FIFA creators continued their practice of making card packs available in Belgium. It argued that this game feature did not constitute gambling and, therefore, there was no reason for them to amend their game. Despite its initial resistance, EA did remove the ability to buy its card packs from games sold in Belgium after court proceedings were initiated against them by the Belgian government.

The prohibition of certain loot boxes is an effective counter to the risks they pose, yet it can be argued that it goes too far. Most adults can make an informed choice to spend their money to advance further within the game, but this prohibition removes their ability to do so and might cause them to rank below gamers from other countries. This is because any changes made by game developers apply only within the countries which have imposed such prohibitions. The local nature of these prohibitions inhibits the EU common market, whilst the use of VPNs and the purchase of games from other countries reduce their impact.

Labelling and minimum age

Whilst Belgium and the Netherlands decided to implement a more prohibitive approach to loot boxes, other countries chose a different path. In Australia, loot boxes are regulated by the dual requirement of labelling and minimum age requirement to play the game. The labelling requirement obliges game developers to prominently label their products with warnings as to the ‘in-game gambling content’ of their games. This is to be accompanied with a minimum age requirement. This age must be no less than the minimum legal gambling age in the state where the game is sold. The combination of these two requirements is designed to inform parents of the potential dangers to their children that these games are hiding.

Australia acknowledged the game developers’ arguments that such game features can be a fun and fulfilling element of a gamer’s playing experience. Rather than taking the drastic route of prohibiting loot boxes entirely, Australia’s priority is to allow parents to make informed choices about the games purchased for their children. A 2020 study by the European Parliament's Committee on the Internal Market and Consumer Protection recommended that EU member states should follow the same approach, suggesting the use of an ‘Includes Paid Random Items’ label. Yet, the study acknowledges that this is by no means a perfect solution, as labels have not been shown to be decisively effective. Many purchases of video games are not made under parental control and labels are often ignored, inhibiting the potential efficacy of such a form of regulation.

Disclosure of probabilities and spending caps

Another option for the regulation of loot boxes is the one adopted by China, South Korea, and others. The way they tackle the hidden risks of loot boxes is to make these risks clear and public. They require that game developers disclose the draw probability for each and every item that may be contained within a loot box. This is designed to discourage game users from spending their money whilst chasing items that are almost impossible to get. The disclosure of the draw probability also makes it clearer that this is a gambling-like activity. Game developers in China are also obliged to keep a record of the results of the loot box draws that have occurred within the last 90 days. This record must be available to the public, ensuring that the disclosed draw probabilities are reflective of the true outcomes. Studies in China have shown that these measures have been effective in stymieing the use of loot boxes. Gamers are discouraged from purchasing loot boxes when they know there is a very small chance of them getting a desirable item and problem-gambling is avoided.

This measure becomes even more effective when combined with a spending cap. This can take the form of either a cap on the amount of money a player can spend within a set time-period, or a cap on the number of loot boxes a player can open. This form of regulation is usually only applicable to games marketed to children, yet it remains the strongest form of protection against the negative effects of loot boxes. It has curbed the use of loot boxes in China, where this measure has been implemented, protecting children and gamers from developing a gambling addiction.

Looking Forward

Most people agree that loot boxes must be regulated to protect children and problem-gamblers, but the differing approaches taken by various countries internationally illustrate the difficulty of finding an appropriate balance that does not lead to over-regulation. The UK will soon have to decide for itself where it stands in the regulatory spectrum, as changes are mandated to tackle the growing issue of gambling, especially amongst children.

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