Over the last five years, gaming regulators around the globe have been paying close attention to loot boxes. Although the regulatory status of loot boxes remains uncertain in the EU, the Report of the European Parliament on Consumer Protection in Online Video Games: a European Single Market Approach, passed on January 18, 2023, could provide some guidance on how loot boxes will be governed in the EU going forward.
This post demonstrates the current regulations of loot boxes in the EU and outlines why the gaming industry should be ready for a potential prohibition on paid loot boxes. Below you’ll find some examples of how some European countries perceive lootboxes and what steps they have taken to regulate them within their borders.
EU Regulations on Loot Box Qualifications
The European Parliament's July 2020 Study on Loot Boxes in Online Games and Their Effect on Consumers, in Particular Young Consumers, provided a broad definition of loot boxes as in-game features that can be obtained through gameplay or purchased with real money. These mystery boxes contain random items, providing players with various types of in-game content such as cosmetic items for customization and items that can affect gameplay. This includes tools, weapons, levels, maps, and in-game currency that can assist players in competing and progressing in the game.
This can create an incentive for players to continue purchasing or playing in order to obtain desirable items. However, this can also lead to potential gambling-like behaviors, as players may spend excessive amounts of money in pursuit of valuable items.
In recent years, loot boxes have sparked controversy and debate over whether they amount to gambling, particularly when they involve real money transactions and the element of chance in obtaining items. Some countries and jurisdictions have taken steps to regulate or ban loot boxes in video games, citing concerns over their potential harm to players, particularly minors.
Overall, loot boxes remain a controversial and polarizing aspect of the gaming industry, with ongoing discussions and debates surrounding their ethical implications and potential impact on players.
The characteristics of loot boxes are similar to those typically associated with gambling activities, including wagering a stake to participate in a game in order to potentially win prizes with monetary value, all of which are determined by chance rather than skill.
In 2020, the European Parliament recognized the similarity and believed that since gambling is not under the jurisdiction of the EU (EU Member States have the authority to regulate gambling activities as they deem appropriate), loot boxes should not be regulated by specific EU laws. Instead, it suggested enhancing consumer protection through current EU consumer protection laws and strengthening parental controls, increasing awareness of the dangers of loot boxes, offering more information about the content of video games, and so on.
Governance of Loot boxes in the European Union
As previously noted, loot boxes in the EU are not regulated by any specific harmonized legislation like gambling activities are. As a result, the EU market for loot boxes is currently disjointed, with each Member State free to establish its own regulations and requirements.
There are different stances on loot boxes in different Member States:
Some countries like Belgium, Finland, and the Netherlands have deemed loot boxes purchased with real money as either illegal gambling or requiring a gambling operator license.
Other countries like Germany, Italy, and potentially Spain in the future are allowing or considering allowing loot boxes under similar conditions to gambling activities.
Certain types of loot boxes in Germany are considered gambling and must follow the country's gambling laws, similar to Casinos Ohne Oasis (or casinos without Oasis). In 2020, the German Youth Protection Commission (KJM) labeled games with loot boxes as harmful to minors and imposed age restrictions and labeling requirements on them. Additionally, in 2021, Germany passed a law requiring games with loot boxes to have age ratings, indicating any potential gambling aspects.
Numerous casinos in Germany continue to function without Oasis regulation as many online gamblers look for other options due to the new stringent regulations. It remains uncertain if loot boxes will be completely prohibited similar to a Casino Ohne Oasis, but steps have been taken to consider potential new regulations for loot boxes in the future.
In France, the online gambling regulator, ARJEL, has determined that loot boxes are not considered games of chance unless their contents can be exchanged for real money. Therefore, most loot boxes are considered lawful in France as long as they follow consumer protection regulations.
The Spanish Ministry of Consumer Affairs released a preliminary bill on July 1, 2022, which aims to regulate loot boxes as part of a broader consultation. The bill emphasizes the need to shield minors from addictive behaviors.
The proposed measures include, but are not limited to, banning minors from accessing or using loot boxes, providing players with the ability to access information on costs and parental controls, and mandating game developers to include a "self-exclusion mechanism" that allows users to voluntarily suspend themselves from using loot boxes for a specified period of time (ranging from 3 months to 5 years) similar to those used in traditional gambling.
Members of the Finnish Parliament have introduced a bill to classify loot boxes as a type of gambling in Finland, representing the country's initial effort to oversee loot boxes. The proposed legislation aims to amend current gambling laws to include prizes with virtual value, guaranteeing that rewards with virtual (non-monetary) worth abide by gambling guidelines.
This progress will be closely observed, particularly in the gaming sector which houses prominent companies like Supercell (famous for Clash of Clans and Brawl Stars) and Rovio (known for Angry Birds) located in Finland. Supercell has already moved away from loot box mechanics in Brawl Stars and has instead implemented a new progressive reward system for unlocking content.
The Importance of the 2023 Report from the European Parliament on Protecting Consumers in Online Video Games
The European Parliament 2023 Report provides suggestions to the European Commission and industry to improve consumer protection related to loot boxes. Key points and recommendations include the need for clearer information for consumers, especially minors, on in-game purchases and the value of virtual currencies, as well as a common European approach to regulating loot boxes. The Parliament also calls for greater transparency from gaming developers regarding the mechanics of loot boxes and urges the Commission to assess if current consumer law adequately addresses issues surrounding loot boxes, with a potential need for legislative proposals to ensure consistent protection across the EU.
The gaming industry heavily relies on revenue from selling loot boxes to players. A potential ban on paid loot boxes in the EU could have a devastating effect on gaming companies operating in the region. It is important for game developers to stay informed about any potential legislative proposals and start preparing arguments to oppose a ban on paid loot boxes.
