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Gaming is a lucrative technology industry in the UK. In 2022, the sector grew to a value of £62 million and is expected to have grown again in 2023.
Children and young adults comprise a substantial section; earlier this year, Ofcom reported that nearly 90% of children in the UK play video games.
Research undertaken by Ipsos MORI for Parentzone found that nearly half of children (49%) believe online games are only fun when you spend money, and over 76% believe online games try to make them spend money; it’s easy to see why this makes for concerning reading.
Online spaces are developing rapidly, and it begs the question of whether it is possible for regulation to keep up with this speed, particularly to protect children from dangerous online practices.
After initially taking a back seat in favour of industry-led innovation, earlier this year, the Government worked with Ukie to publish a set of principles and guidance to govern the use of paid loot boxes in games.
What is a loot box?
Loot boxes are a popular monetisation technique in games, which have been likened to gambling. Loot boxes can be purchased in-game using virtual currencies or actual money and contain randomised virtual rewards that can range from power-ups to skins to rare items.
They are unique because of their element of chance; players know they will get something but need to know exactly what. For example, a loot box may have a 5% chance of yielding the anticipated item on opening (its drop rate), but 95% of the time will yield a different prize.
Some loot boxes operate using player data to lower the drop rate of players who have previously spent more than other players on loot boxes to encourage them to keep seeking the anticipated reward.
Are loot boxes’ gambling’?
The Gambling Act 2005 regulates gambling activity in the UK. The Act defines ‘gambling’ as ‘playing a game of chance for a prize’, with a ‘prize’ defined as ‘money or money’s worth’. Both the Government and the Gambling Commission drew a key distinction between gambling and loot boxes based on this definition.
While there is an element of chance to them, loot boxes are not designed to be exchanged for money (and often have little real-world value). In addition, there are rarely exchanges between players of items obtained via loot boxes (or otherwise in return for money).
Finally, players know they will obtain something from a loot box, even if the item in question may not be the item they wanted. The Government questioned whether reform to the Act, likely to be substantial and expensive, would effectively tackle the potential risks of loot boxes.
What protections(if any) were in place?
In 2020, the Government issued a ‘call to evidence’ regarding loot boxes to establish whether they carried a risk of gambling behaviour and excessive spending in games.
Evidence (including a study by InGame) found that, while there was an ‘association’, there was no determination of a causative link between loot boxes and harmful behaviours. As a result of this, the Government proposed an industry-led response to developing protections for young players and took no further action for the time being with respect to reforming gambling legislation.
Within the gaming sector at that time, only games which were available for purchase through the Apple App Store and Google Play were required to display probability rates for loot boxes.
The Government recommended the following measures to promote safe gameplay:
- Children and young people should not be able to purchase loot boxes without the consent of their parent or guardian, and
- All players should have access to spending controls and transparent information,
They also convened the Technical Working Group to look into the issue further.
What has now been put in place?
In July 2023, Ukie, the gaming trade association, published a set of principles and guidance on paid loot boxes, as recommended by the Technical Working Group. The principles include the following recommended measures:
- making available parental controls to prevent minors from purchasing loot boxes without permission;
- launching a public information campaign about parental controls;
- disclosing the existence of loot boxes to buyers prior to purchasing a game;
- Designing and presenting loot boxes in a way which is clear to players;
- Giving clear probability/drop rate disclosures to players on the likelihood of obtaining items from loot boxes (and where player data is used, disclosing this);
- Committing to lenient refund policies where a loot box has been purchased without parental consent.
There is a 12-month period in which game developers should implement these principles, and following this period, the Government will assess the effectiveness of the principles and other recommended measures.
Looking forward
The principles, while a step towards protecting players and consumers, especially children, are a voluntary code – there are no sanctions nor regulatory bodies to enforce them. Rather, it is the players (and the players’ parents) who will be practically enforcing these principles.
It seems probable that if there is no collective move within the gaming industry towards adhering to the principles in the next 12 months, the next step may be to legislate on loot boxes and introduce stricter legislation.
Legislative reform would build on the trend of other recent moves to make online spaces safer for children, such as the Online Safety Bill, and wider obligations and standards applying to games and online services in general, such as CAP advice on advertising in-game purchases and ICO guidance on age-appropriate design in the ‘Children’s Code’.
Our view is that an industry-led approach might be more effective at keeping pace with the development of in-game purchases as it is more agile and able to pivot quickly to address issues as they arise and develop tailored tools and solutions than trying to amend legislation to meet the ever-changing nuances of the gaming industry.