Loot boxes in video games

The video game monetisation method of loot boxes will not be banned in the UK, despite a government consultation claiming evidence of an association between the features and problem gambling.

Loot boxes have attracted comparison with gambling because they allow players to spend money to unlock in-game rewards, such as special characters, weapons or outfits, without knowing exactly what they will get.

The features, popular in games such as Call of Duty and the Fifa football series, were effectively banned in Belgium in 2018, but the censorship culture minister, Nadine Dorries, said the UK would not follow suit.

Instead, after a 22-month consultation, she said the government would discuss tougher industry-led protections with the UK's gaming trade. Dorries explained the decision saying that

Legislating to impose curbs or a prohibition on loot boxes as part of an expected overhaul of the UK's gambling laws could have unintended consequences.

For example, legislation to introduce an outright ban on children purchasing loot boxes could have the unintended effect of more children using adult accounts, and thus having more limited parental oversight of their play and spending, the government said, in a response to the consultation published in the early hours of Sunday morning.

While the Department for Digital, Culture, Media and Sport (DCMS) stopped short of proposing legislation, Dorries said:

Children and young people should not be able to purchase loot boxes without parental approval.

The House of Lords Gambling Committee claims that video game loot boxes should be regulated under gambling laws.

The Lords claim that loot boxes they should be classified as games of chance - which would bring them under the Gambling Act 2005. If a product looks like gambling and feels like gambling, it should be regulated as gambling, their report says. And they warn that such a change should not wait.

In reality the regulation of gambling is an entirely different kettle of fish that is about adult entertainment and significant levels of moeny being lost. Surely the monetising of games throught loot boxes would be better dealt with by those with expertise in child psychology.

Ex BBC boss Michael Grade, chairman of the committee, told BBC Breakfast that lots of other countries have already started to regulate loot boxes because they can see the dangers which is teaching kids to gamble. He said the Gambling Act was way behind what was actually happening in the market but he added that the overwhelming majority of the report's recommendations could be enacted today as they don't require legislation.

Gambling Harms: Time for Action Report: Key recommendations

The Committee sets out a range of recommendations across different areas to reduce gambling-related harm.

• The gambling industry offers a variety of products to consumers, including some which can be highly addictive. The Gambling Commission should create a system for testing all new games against a series of harm indicators, including their addictiveness and whether they will appeal to children. A game which scores too highly on the harm indicators must not be approved.
• The equalisation of speed of play and spin, so that no game can be played quicker online than in a casino, bookmaker or bingo hall.
• The Gambling Commission must explain the minimum steps which operators should take when considering customer affordability, and make clear that it is for the operator to take the steps which will enable them to identify customers who are betting more than they can afford.
• The creation of a statutory independent Gambling Ombudsman Service, modelled on the Financial Ombudsman Service, to settle disputes between gambling operators and gamblers.
• The Government must act immediately to bring loot boxes within the remit of gambling legislation and regulation.
• Gambling operators should no longer be allowed to advertise on the shirts of sports teams or any other visible part of their kit. There should also be no gambling advertising in or near any sports grounds or sports venues.
• Problem gambling is a common mental health disorder, and the NHS has the same duty to treat it as to treat any other disorder. Last year the NHS promised to open 15 new clinics. It should do this before 2023 and establish a comparable number within the following few years.

The argument about loot boxes being gambling is very tiresome. The debate about whether they are akin to gambling has become more important than the debate about how to keep children safe. Surely Loot boxes can be deemed an unacceptable monetisation method for children on its own merits, without trying to match apples to pears.

Longfield seems a bit new to the job, she is now calling for small games to be fully vetted by censors when this approach was given up ten years ago due to the unmanageable volume and unviable economics of expensive censors checking small games.

She is also dreaming that age verification is some sort of panacea for all societies ills. Parents generally know exactly what age their kids are, but the knowledge doesn't magically make for an idyllic childhood.

Anne Longfield, the Children's Commissioner for England, has published a report, Gaming the system' which looks at the experiences of children who play games online. The Children's Commissioner's Office commissioned the research company Revealing Reality to speak to groups of children who play online games like FIFA, Fortnite and Roblox about what they love and what worries them about gaming, both to shine a light on their experiences and to inform policy recommendations.

With 93% of children in the UK playing video games, the Children's Commissioner is today calling for new rules to tighten up gambling laws and to address the worries children have expressed about how they feel out of control of their spending on online games.

However, it also reveals the drawbacks, in particular highlighting how many children are spending money on 'in-game' purchases because they feel they have to in order to keep up with friends or to advance in the game.

The report also shows how some children feel addicted to gaming and do not feel in control of the amount of time they spend playing games. Younger children told us they are playing games for an average of two to three hours a day, whereas older children are playing for three or more hours.

To address the concerns raised by children in the report, the Children's Commissioner makes a number of recommendations, including:

• Bringing financial harm within the scope of the Government's forthcoming online harms legislation. Developers and platforms should not enable children to progress within a game by spending money and spending should be limited to items which are not linked to performance.

• All games which allow players to spend money should include features for players to track their historic spend, and there should be maximum daily spend limits introduced in all games which feature in-game spending and turned on by default for children.

• The Government should take immediate action to amend the definition of gaming in section 6 of the Gambling Act 2005 to regulate loot boxes as gambling.

• The Government's age appropriate design code must include provisions on nudge techniques and detrimental use of data, as proposed in the draft code.

• Games that are distributed online should be subject to a legally enforceable age-rating system, just as physical games are. There should be a requirement for an additional warning to be displayed for games which facilitate in-game spending. The Government should consult on whether age ratings of all games should be moderated pre-release, just as physical games are.

• Online games should be a key focus of digital citizenship lessons in schools, rather than lessons focusing exclusively on social media. Teachers involved in the delivery of these lessons should be familiar with how key online games that are popular with children work.

Loot boxes in video games have come under fire as method of monetising games. Complainers have attacked them as if they were casino gambling, surely an unjust accusation but nevertheless loot boxes can be a rather ruthless way to extract money.

Now the films censors of New Zealand's OFLC are reporting on an evolution towards fairer monetisation methods. The OFLC  speaks about developments in a blog post:

You don't know what you are paying for and if you don't get the item you want then you can end of buying a bunch of them.

People have been getting pretty annoyed about this for a while and pressure built up . In early August, a group of companies that make game consoles announced a policy where they will only allow games that show players their chances of getting items from loot boxes . This chance is commonly called a drop rate by those who talk about video games, as it is the rate at which items will drop. The announcement means that, all things going to plan, games that are published on the PlayStation, Xbox, and Switch will show drop rates from 2020 onwards.

Since the announcement last week, a few game developers have begun removing loot boxes from their games entirely . Their solution is to replace loot boxes with boxes where players can see what is in them. Last week, popular game Apex Legends removed loot boxes less than a week after adding them in.

Players generally view the policy announcement as a positive step forward, although some commentators have pointed out that showing the drop rate doesn't change the dodgy nature of loot boxes, as they are still based entirely on random chance.

The policy appears to be based off regulations that were in place in China until recently, which also required games to show drop rates. Since then, Chinese regulations have intensified, placing limits on how many loot boxes players can open in a day and making games increase the drop rate with each box opened. These regulations have proven effective in giving developers pause. Insiders now recommend moving away from loot box mechanics altogether in the Chinese market .

The fact that China felt the need to strengthen its regulations lends credence to the fact that simply showing players drop rates may not fully manage concerns around loot boxes.

More troubling is the revelation that game publishers previously offered to increase drop rates for people whom they paid to open loot boxes on video. By changing the drop rates, viewers are given an inflated idea of what they are likely to get from loot boxes. This suggestion of false advertising taps into why a lot of players dislike loot boxes and think that they are exploitative and anti-consumer.

These changes show that the industry is starting to solidify a focused strategy in order to deal with the potential harms from loot boxes. The space remains fast-moving. I will do my best to keep on top of it and let you know about more developments as they arise.

The UK Gambling Commission has told MPs that it does not currently oversee the purchase of in-game content like Fifa player packs and video game loot boxes.

This is because there is no official way to monetise what is inside them. A prize has to be either money or have monetary value in order for it to fall under gambling legislation.

However, there are unauthorised third party sites which buy and sell in-game content or enable it to be used as virtual currency. Gambling Commission programme director Brad Enright admitted that games publisher EA, which sells the football team management game Fifa, faced a constant battle against unauthorised secondary markets.

Dozens of parents have complained that their children are spending hundreds of pounds on in-game purchases, and have criticised the process as a form of gambling as there is an element of chance in the outcome and their children are then tempted to buy again in order to try to get the result they want.

Gambling Commission chief executive Neil McCarthur admitted that there were significant concerns around children playing video games in which there were elements of expenditure and chance. However, he added that under current legislation it did not classify as gambling.

US Senator Josh Hawley formally filed the Protecting Children from Abusive Games Act (PCAGA) on May 23 2019. His proposal aims to ban what he considered manipulative video game features aimed at children. Hawley tweeted:

It's pretty simple. Video game companies shouldn't put casinos targeted at kids in their games.

Through the PCAGA, Hawley targets games that are aimed at minors and feature loot boxes and pay-to-win mechanics. He views these features as harmful to children--a way for game companies to monetize the addiction minors already experience by playing video games, he claims.

The bill states that the Federal Trade Commission (FTC) will enforce these rules, if passed. Companies that violate the rules would be financially penalized. Additionally, the bill calls upon the FTC to submit a report to the Senate on the psychological effects of pay-to-win mechanics and loot boxes on users and if such features induce compulsive purchasing behavior by minors.

The Entertainment Software Association (ESA) has already responded to the bill with its concerns , as CEO Stanley Pierre-Louis called the bill flawed and riddled with inaccuracies. He claims the impact is far-reaching and may negatively affect the more than 220,000 Americans employed by the video game industry. He believes that control of any in-game purchases made by minors should be left up to parents, rather than the federal government.

This bill still has a long way to go to become law.

The US Republican senator Josh Hawley of Missouri has announced that he would be introducing a bill banning manipulative design features in video games with underage audiences, including the sale of loot boxes.

The legislation would prohibit the sale of loot boxes in games targeted at children under the age of 18. Games companies could also face penalties from the Federal Trade Commission if companies if they knowingly allow children to purchase these randomized crates.

Regulators would determine whether a game is targeted at minors by considering similar indicators that they already use under the Children's Online Privacy Protection Act (COPPA). Subject matter and the game's visual content would help regulators determine who the game is marketed toward. When a game is designed for kids, game developers shouldn't be allowed to monetize addiction.

Pay-to-win mechanics in games targeted at minors would also be outlawed under this legislation. This includes progression systems that encourage people to spend money to advance through a game's content at a faster pace.

Fifteen EU-based regulators plus Washington State have made a joint declaration while Australian based study likens loot boxes to gambling, not baseball cards

Fifteen EU gambling regulators from the UK, Ireland, France, Austria, Poland, Latvia, the Czech Republic, Spain, the Isle of Man, Malta, Portugal, Jersey, Norway, and the Netherlands plus US representation from the Washington State Gambling Regulator published the letter, noting their concerns with the business model.

In addition to the loot box problem, the letter addresses how it will take on websites that let players either gamble or sell in-game items like skins or weapons with real-world money.

One of the signatories, Neil McArthur, CEO of the UK Gambling Commission said:

We have joined forces to call on video games companies to address the clear public concern around the risks gambling and some video games can pose to children. We encourage video games companies to work with their gambling regulators and take action now to address those concerns to make sure that consumers, and particularly children, are protected.

The letter speaks of the groups concerns but does not detail the direction sthat the group will take in reacting to the concerns.

According to VentureBeat, a study conducted by the Australian Parliament's Environment and Communications References Committee showed that there were links between loot box spending and problematic gambling. The population sample size was 7500 people.

The more severe a gamers' problem gambling was, the more likely they were to spend large amounts of money on loot boxes. These results strongly support claims that loot boxes are psychologically akin to gambling, said the report, conducted by Dr. David Zendle and Dr. Paul Cairns.

In a statement, the pair added loot boxes could potentially act as an introduction to gambling or take advantage of gambling disorders. They note that the industry tends to brush off loot boxes as similar to harmless products like baseball cards, football/soccer stickers, and products along those lines.

In related news games maker EA could face legal issues for ignoring a ruling by the Belgian government to remove the Ultimate Team portion from FIFA 18.

France's online gaming authority (ARJEL, Autorité de Régulation des Jeux En Ligne) has decided that loot boxes in premium-priced games are not gambling. It determined that loot boxes are not legally considered gambling, and therefore are not gambling.

However, ARJEL will continue to monitor the matter and is also calling for more unilateral support from the European Union in order to achieve a sound consensus on whether or not to consider loot boxes gambling.

According to ARJEL, the fact that you can't readily cash out your rewards from loot boxes for real-world currency means that in the minds of regulators it's not quite gambling. For them, the only way it would be gambling is if players could actually retrieve the money that they invested into the product.

However, ARJEL also believes that loot boxes do contain questionable psychological hooks that work very similar to slot machines and roulette wheels in terms of luring gamers into a feeling of needing to spend more money in order to acquire the item they seek.

The Dutch gambling authority will enforce a new ban on loot boxes. They identified four games that offer loot boxes that are considered gambling. According to the public broadcast company these games are FIFA 18, DOTA 2 , PlayerUnknown's BattleGrounds and Rocket League .

These games had until the 20th of June to make changes to the gambling aspect of their loot boxes. Starting from Thursday the gambling authority will enforce the rules. Fines can be 830.000 euro (960.000 dollar) or 10% of the company's worldwide revenue. If they don't make changes, the public prosecutor will look into prosecution.

The Dutch Gaming Authority (kansspelautoriteit) has ruled on the matter of loot boxes i computer games and has determined that out of ten popular games with loot boxes the commission investigated, four don't comply with the country's Better Gaming Act.

According to the Dutch Gaming Authority, the four games in violation of the Better Gaming Act because they feature elements in them that can also be found in the gambling world. Because loot box items could be traded for euro at fluctuating prices, these items have economic value. And since players can earn money for rare items, the games violate the rules of chance.

Of the remaining six games the Dutch Gaming Authority investigated, they found that the loot boxes contained items that could not be traded. Thus they are in compliance with the Better Gaming Act. However, the group still criticized how loot boxes were implemented as slot machines or roulettes.

Companies that do not comply with the Better Gaming Act can be fined or even prohibited from being sold in the Netherlands.

The games will only be officially identified if they don't take the required remedial action. However it has been reported that likely games requiring cuts are Playerunknown's Battlegrounds (PUBG), Dota 2 , and Rocket League which include items that can be traded through third-party services

The Entertainment Software Rating Boar d (ESRB) has announced that it will begin assigning a new "In - Game Purchases" label to physical ( e.g., boxed) games.

The In - Game Purchases label is one of several interactive elements that ESRB currently assigns to notify consumers about the interactive or online features of a digital or mobile game. Consumers can expect to start seeing this new notice on all games that can be purchased in stores and wherever those games can be downloaded in the near future.

ESRB president Patricia Vance said:

The video game industry is evolving and innovating continually, as is the ESRB rating system. ESRB's goal is to ensure that parents have the most up-to-date and comprehensive tools at their disposal to help them decide which games are appropriate for their children/ With the new In-Game Purchases interactive element coming to physical games, parents will know when a game contains offers for players to purchase additional content. Moreover, we will be expanding our efforts to educate parents about the controls currently at their disposal to manage in-game spending before their kids press 'Start'."

The new In-Game Purchases label will be applied to games with in-game offers to purchase digital goods or premiums with real world currency, including but not limited to bonus levels, skins, surprise items (such as item packs, loot boxes, mystery awards), music, virtual coins and other forms of in-game currency, subscriptions, season passes and upgrades (e.g., to disable ads).

The ESRB also launched ParentalTools.org , an easy - to - use one - stop resource for parents

Germany is looking into imposing restrictions on loot boxes in videogames, according to Welt. A study by the University of Hamburg has found that elements of gambling are becoming increasingly common in videogames. It's an important part of the game industry's business model, but the chairman of the Youth Protection Commission of the State Media Authorities warned that it may violate laws against promoting gambling to children and adolescents.

The Youth Protection Commission will render its decision on loot boxes in March.

Update: Sweden too

9th February 2018.  See  article from neoseeker.com

Ardalan Shekarabi, the nation's minister of civil affairs, is concerned about making sure Swedish consumer protection laws apply across the board when it comes to gaming. Shekrabi admits that loot boxes are like gambling, but has asked Swedish authorities to consider whether that's what they should actually be classified as. The idea is to have legislation ready by January of next year to ensure Swedish gamers don't have to worry about a transaction falling outside of the nation's consumer protection laws in the event something goes south.

Apple has changed the rules around how games on its app store use loot boxes.

These boxes are random rewards for gameplay and often give players benefits and power-ups that can be used in games.

In a change to its developer guidelines, Apple said games must now let players know the odds of getting particular items in the boxes. In the updated guidelines, Apple said any in-game mechanism that rewards players with randomised virtual items must list the odds of receiving each type of item. In addition, it said, customers must be informed of these odds before they buy the boxes or rewards.

Many games offer extras to players that can change the appearance of the game, introduce new characters or bestow power-ups that help people as they play. Some titles let people buy loot boxes with in-game funds they generate by playing or by spending real money to purchase the game's virtual cash.

Hawaii State Representative Sean Quinlan has advocated for self-regulation of loot boxes by the video game industry whilst also suggesting that such games should carry a 21+ age rating.

He said that ultimately, it's best for the industry to self-police. The ideal solution would be for the game industry to stop having gambling or gambling-like mechanics in games that are marketed to kids... BUT ... he believes games makers should be held accountable. The ESRB would need to enforce higher-grade ratings and other labels to distinguish games that rely on predatory monetization. As an example, he said that the ESRB could say that if a game has loot crates, it gets a 21-plus rating.

The Entertainment Software Association is proving resistant, however. Their response ran along the same lines as many publishers, asserting that loot boxes are a voluntary feature and that the gamer makes the decision in regards to their purchase .