In the past five years, loot boxes have been the focus of many gaming regulators worldwide. While the regulatory status of loot boxes is still unclear in the EU, the Report of the European Parliament on Consumer Protection in Online Video Games: a European Single Market Approach, adopted on January 18, 2023, may bring some clarity on how loot boxes will be regulated in the EU in the future.
This blog post illustrates how loot boxes are currently regulated in the EU and explains why the gaming industry should already prepare for a possible ban on paid loot boxes.
Qualification of Loot Boxes in the EU
In its Study on Loot Boxes in Online Games and Their Effect on Consumers, in Particular Young Consumers of July 2020, the European Parliament broadly defined loot boxes as “features in video games which are usually accessed through gameplay, or which may be optionally paid for with real-world money. They are ‘mystery boxes’ which contain randomised items, so players do not know what they will get before opening. Players can access diverse types of in-game content through loot boxes such as cosmetic items for game customisation (e.g. skins and new looks for the player’s avatar) or items affecting gameplay (e.g. tools, weapons, levels, maps, in-game currency etc.) which could, for example, help players compete better or advance more quickly.”
Thus, loot boxes are usually characterized by the following features:
- Access to loot boxes is made either via payment (real or virtual currency) or by playing a video game;
- The probability of winning is not always known. While certain boxes offer the chance of winning specific items, this is not often the case (i.e., players purchase or win loot boxes and obtain a chance to win an item without knowing in advance what it will be);
- The items obtained from loot boxes may be converted into real or virtual currency or into items with value to the players.
Loot boxes’ features resemble the features usually attributed to gambling activities, i.e., (i) engagement of stake to participate in a game to (ii) obtain winnings with monetary value, (iii) based on chance (players cannot influence the outcome).
In 2020, the European Parliament acknowledged this resemblance and considered that, as gambling is not a competence of the EU (EU Member States are competent to regulate gambling activities as they see fair), loot boxes should not be subject to specific EU legislation. However, it proposed reinforcing consumer protection through existing EU legislation on consumer protection and by reinforcing parental control mechanisms, raising awareness about the risks related to loot boxes, providing further information on the content of video games, etc.
Regulation of Loot Boxes in the EU
As mentioned above, aside from EU consumer protection laws, loot boxes are not subject to any specific EU harmonized legislation (as is the case for gambling activities). This means that the EU legal market on loot boxes is currently fragmented as all EU Member States may adopt their own requirements and laws to regulate loot boxes.
There are various positions towards loot boxes:
- Some Member States adopt a strict stance on loot boxes. For example, Belgium, Finland and the Netherlands have qualified loot boxes purchasable with real money (as opposed to obtained by playing) as either illegal gambling or gambling subject to a gambling operator license.
- Other Member States allow or are considering allowing loot boxes under conditions similar to those that apply to gambling activities. This is the case in Germany, Italy, and will likely be the case in Spain in the near future (a legislative proposal was submitted in July 2022).
- In France, the Regulator of the Online Gambling Market (“ARJEL”) has considered that loot boxes were not subject to the rules on games of chance, unless the content of the boxes could be traded for real money afterwards. As this is usually not the case, most of the loot boxes are lawful in France provided that they comply with the general rules on consumer protection.
European Parliament’s 2023 Report on Consumer Protection in Online Video Games
The European Parliament 2023 Report makes various recommendations to the European Commission and industry to enhance consumer protection with regard to loot boxes. Below, we highlight the main remarks and recommendations:
- The European Parliament stresses that there is no specific consumer protection mechanism at EU level to ensure player protection with regard to paid loot boxes;
- It also stresses that consumers “should have all the necessary information about an online video game, including on the presence of in-game purchases such as loot boxes and other apparently randomised in-game purchases, and should be aware of the type of content before starting to play and during the game, stresses that such information should be clearly displayed and easily understandable for all consumers before the purchase of the game and before each in-game purchase to better protect consumers, especially minors and young children, and to help parents to understand and control their spending; notes that, when virtual currencies are used in online games, their value in real-world currency should always be clearly and prominently indicated to consumers for each purchase;”
- The Parliament calls on the Commission to “analyse the way in which loot boxes are sold, and to take the necessary steps to bring about a common European approach on loot boxes to ensure adequate protection of consumers, in particular minors and young children;”
- The Parliament urges that gaming developers provide greater transparency regarding the probabilities of the loot box mechanisms they offer in their games. This should include easily understandable language on what the algorithms they use are trained to achieve;
- More importantly, the European Parliament calls on the Commission to “assess during its upcoming fitness check of EU consumer law on digital fairness whether the current consumer law framework is sufficient to address all the consumer law issues raised by loot boxes and in-game purchases and, if not, calls on it to present a legislative proposal to adapt the current EU consumer law framework for online video games or to present a stand-alone legislative proposal on online video gaming to establish a harmonised European regulatory framework that ensures a high level of consumer protection, in particular for minors and young children; considers that these proposals should assess whether an obligation to disable in-game payments and loot boxes mechanisms by default or a ban on paid loot boxes should be proposed to protect minors, avoid the fragmentation of the single market and ensure that consumers benefit from the same level of protection, no matter their place of residence” (emphasis added).
Why it matters…
The gaming industry currently generates a lot of its revenue from the sale of loot boxes to players. The impact of an EU legislative proposal banning paid loot boxes would be disastrous for the gaming industry active in the EU.
Therefore, even if we are still at a very early stage and given that it is uncertain whether the Commission will present a legislative proposal, game developers should closely follow any developments that could stem from the Parliament’s Report, and already considers preparing arguments to present to the Commission against a ban on paid loot boxes.