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The House of Lords Select Committee published its report on the Social and Economic Impact of the Gambling Industry on 2nd July 2020. The report, which sets out a wide range of recommendations to reduce gambling-related harm, has called for the government to classify loot boxes as ‘games of chance’ thereby bringing them under the remit of the Gambling Act 2005. The committee has urged the Government to take immediate action to regulate loot boxes to ensure users, particularly young people, are protected.

What are loot boxes?

Loot boxes are defined in the report as “…a virtual item which can be redeemed to receive a further randomised item.”[1] Players can either pay for the loot box itself or receive the box during the game and pay for a key to redeem it. Upon opening the loot box, the player may receive a new character customisation, weapons or an avatar for their character (‘skins’) but typically you don’t know what you’re going to get. Whilst loot boxes aren’t needed to play the games in which they appear, these items can affect progress through the game or as a way to convey status. The lure of what is hidden inside the box is extremely tempting for gamers keen to gain a competitive advantage.

Strictly speaking loot boxes are not a new phenomenon. Since their introduction in the early 2010s, they have featured in some of the biggest selling video games of all time such as FIFA and Fortnite. This may account for the fact that their prominence has increased dramatically from 4% to 71% in the last decade[2]. The preponderance of loot boxes corresponds with a sharp increase in consumer spending with reports that around £23bn was spent on loot boxes and skin gambling in 2018. Similar reports predict that this will increase to £35bn by 2022[3].

What can I do if my child has made an unauthorised purchase in a video game?

It is reported that around 93% of 10-16 year olds in the UK regularly play computer games[4]. Parents who buy video games for their children can often find themselves facing unexpected charges through in-game add-ons, such as loot boxes. Children, who may not comprehend that they are using real money to make these purchases or understand what they are purchasing can quickly spend hundreds of pounds purchasing loot boxes. In some cases, this has led to uncontrollable and significant online spending. One such case is that of a disgruntled father discovering that his children had spent nearly £550.00 buying player packs (a form of loot box) on FIFA. It was only when his card was declined did he realise these unauthorised purchases had been made[5].

Unfortunately, there is limited recourse to parents who have found that their children have made unauthorised purchases in video games. Parents may be able to acquire a refund directly from the game provider but this is largely dependent on what platform the child is playing on. If a child has made a purchase on an adult account (and only adult accounts can make on-line purchases) then it is unlikely a refund will be given. However, in certain cases where it can determined that a child has made a purchase without parental permission, a refund may be given.

Alternatively, a parent could seek to recover their money directly from the card issuer through a chargeback scheme if the unauthorised purchase is made using a debit card or under Section 75 of the Consumer Credit Act 1974 if using a credit card, although success is certainly not guaranteed. We would advise parents to take full precautions to prevent this from happening and limit access for on-line purchases. In certain devices, this can be achieved by turning off the option for in-app purchases, setting up a separate child account or enabling password authorisation whenever an in-game purchase is made. 

The threat of regulation

The reporting of similar cases has generated a debate as to the ethics of spending within games and whether more should be done to control in-game purchases. The wider issue is that young people who gamble with loot boxes are more susceptible to gambling addiction later in life.  Recent research has suggested that young people who spend money on loot boxes are 10 times more likely to be problem gamblers later in life[6]. This damning research has led to accusations that the gaming industry is profiting from doing customers harm, especially those that are the most vulnerable.

Concerns about the relationship between loot boxes and problem gambling feature in the House of Lords Select Committee report. The report calls for the government to act urgently to specify that loot boxes and other similar games are ‘games of chance’. This will have the effect of regulating loot boxes as gambling and require game developers to obtain an operating licence and comply with a set of statutory conditions as set out in the Gambling Act 2005 (the ‘Act’).

Crucially, under UK Law if a game of chance for a prize is not for money or money’s worth then it is not constituted as gambling. The problem with this definition is that certain items in video games that do not have a monetary value, such as items contained in a loot box, still hold significant value to a child. It is with this in mind that the report recommends an amendment to the current definition of gambling in the Act. This will give ministers the power to specify any activity that has the characteristics of gambling and ensure all future gambling like products are regulated as gambling.

Certain countries in Europe have already taken action, most notably Belgium. In April 2018, loot boxes were banned altogether under Belgian law after the Belgian Gaming Commission reported that loot boxes did meet their own legislative definition of a game of chance. The Netherlands Gaming Authority has also cracked down on loot boxes making some of boxes illegal depending on the content. So is this really game over for loot boxes? In early 2019, Epic Games withdrew random loot box purchases from Fortnite following a backlash from parents, replacing them with see-through loot boxes so players can see what’s in them before they buy it. Similarly, EA removed paid loot boxes from Star Wars Battlefront II in response to complaints that the game was applying possible gambling practices. This stemmed from some of the main characters in the franchise only being available through loot boxes. As the threat of regulation looms, are these early signs that the video game industry is changing their practices on loot boxes?

[1]Select Committee on the Social and Economic Impact of the Gambling Industry, Gambling Harm—Time for Action’, 2nd July 2020, Para 422, Page 110.

[2]The changing face of desktop video game monetisation’, David Zendle, 1st November 2019.

[3] ‘In-game gambling – the next cash cow for publishers’, Juniper Research, 1st May 2018.

[4]The Rip-Off Games – How the new business model of online gaming exploits children’, Parent Zone Report, 29th August 2019.

[5] ‘The kids emptied our bank account playing FIFA’, Zoe Kleinman, BBC News, 9th July 2019.

[6] Select Committee on the Social and Economic Impact of the Gambling Industry – Corrected oral evidence: Social and Economic Impact of the Gambling Industry, Tuesday 3rd March 2020.