The Government has published its response to the call for evidence on loot boxes in video games, which was launched in September 2020. The call for evidence received over 32,000 responses from players and parents of children and young people who play games, and 50 submissions from the games industry, researchers, and other organisations and individuals.
The response to the call for evidence was developed alongside the Government's review of the Gambling Act 2005 and, while the white paper setting out the conclusions from the review of the Gambling Act 2005 has not yet been published, the Government has confirmed that it does not intend to amend or extend the scope of gambling regulation to cover loot boxes at this time. The Government also does not presently intend to make changes to any other statutory consumer protections with regards to loot boxes; instead, industry-led measures will be pursued.
The Government's view is that:
- Purchases of loot boxes should be unavailable to all children and young people unless and until they are enabled by a parent or guardian;
- All players, including children, young people and adults, should have access to and be aware of spending controls and transparent information to support safe and responsible gaming; and
- Better evidence and research, enabled by improved access to data, should be developed on the positive and negative impacts of video games to inform future policy making on loot boxes and video games more broadly.
DCMS will convene a technical working group to pursue enhanced industry-led solutions to mitigate the risk of harms for children and young people and adults from loot boxes in video games, with the expectation that this group will develop industry-led design norms and best practice guidance. The group is scheduled to deliver its first update in the first three months of 2023. In addition, they will work with academics and other partners to launch a Video Games Research Framework by the end of 2022.
The Government stated that it will keep this position under review and will not hesitate to consider legislative options in the future if not satisfied with the progress of industry-led protections.
The Gambling Act 2005 defines 'gaming' as 'playing a game of chance for a prize', with a 'prize' being defined as 'money or money's worth'. The Government and the Gambling Commission's view is that there are two important distinguishing factors between gambling products and loot boxes. First, that loot box prizes are not intended to be exchanged for cash (i.e. they do not normally have real world monetary value outside the game). Second, that the networks via which games are accessed are not designed to have open functionality to facilitate the trading of in-game items between players or otherwise in return for money. The conclusion is therefore that the prize does not fit within the definition of 'money or money's worth'.
A range of responses were received on whether the definition of gambling under the Gambling Act should be extended. Some respondents argued that the focus on 'money or money's worth' is misplaced and that, if people are willing to spend money on loot boxes, they "evidently value the contents irrespective of objective worth or saleability". Others argued that loot box items cannot normally be 'cashed out', and the certainty of receiving something from a loot box – even if it is not the desired item – is a key difference between loot boxes and traditional gambling and compares to other non-regulated consumer products with a randomised element, such as trading cards.
In addition, the consultation explains that changing the Gambling Act to regulate loot boxes would require substantial changes to the gambling tax system, would nearly double the annual cost of running the Gambling Commission and risks capturing other activities with a random reward mechanism.
The consultation also looks at an assessment of empirical studies on loot boxes conducted by InGame, which found that a number of them have identified a link between loot box spend and problem gambling behaviours. However, InGame's report goes on to conclude that there are a range of plausible explanations that could underpin the association between loot boxes and problem gambling behaviours, and research has not established a causative link between the two.
Some responses also asserted that certain loot box practices do not align with existing UK consumer protection regulations. For example, where games developers create tutorials that give an unrepresentative understanding of the likelihood of wining rare prizes from loot boxes, or where players are not given appropriate notice of the use of 'pity timers' in a game (which change the probability of obtaining items from loot boxes as players make more purchases). InGame's report also found that there was a lack of transparency concerning the use of player data and personal information with regards to loot boxes.
Notwithstanding calls for the Government to introduce changes to gambling and consumer protection legislation in order to tackle the potential risk posed by loot boxes, the Government has decided to pursue industry-led measures as a first step. This contrasts with the approach taken by some other European countries. For example, the Belgian Gaming Commission has issued an opinion indicating that it considers certain types of paid loot boxes to fall within the scope of the concept of 'games of chance'; the Spanish Ministry of Consumer Affairs has published a draft bill to specifically regulate loot boxes and in the Netherlands a motion has been filed with support from a number of political parties calling for more stringent regulation of loot boxes (despite the Dutch Council of State having ruled in March this year that loot boxes do not constitute gambling).
The Government's reasoning is that an industry-led approach:
- Can enable the development of tailored tools and information, as games companies and platforms already have the technical expertise and capability to develop and improve protections, and to communicate with players, parents and children;
- Would be adaptable, and may be more able to keep pace with a fast-changing environment for in-game purchases, in comparison to legislative options; and
- At least in the first instance, avoids the risk of 'unintended consequences' which may be associated with legislation, such as implementation issues, more children using adult accounts if bans are imposed, or (if the definition of 'gambling' were broadened to capture loot boxes) unintentionally bringing a range of other consumer products into the scope of gambling regulation.
The Government's consultation response further notes that "the Gambling Commission has shown that it can and will take action where the trading of items obtained from loot boxes does amount to unlicensed gambling, and it will continue to take robust enforcement action where needed." In relation to consumer protection law, the Government's view is that the UK already has high consumer standards. In this regard, the consultation response makes reference to the Online Safety Bill, work being done by the CMA around online choice architecture, the Age Appropriate Design Code being supervised by the ICO, and the new guidance published by the CAP on advertising in-game purchases.
The Government has, however, been clear that if the industry does not improve protections for children, young people and adults, with tangible results to be seen in the near future, then it "will not hesitate" to consider legislative options. It is therefore important that industry players carefully consider the 'best practice' measures that should be put in place, and that operators' views are heard and considered by the DCMS working group.
It will also be important for gaming companies to consider the Government's (and Gambling Commission's) views on the distinction between loot box mechanics and gambling products and be vigilant in (for example) preventing players from 'cashing out' loot box items, to ensure that their games do not unintentionally stray into the remit of gambling regulations.