Self-Regulation for Loot Boxes: Is it a Gamble?

Loot boxes: what are they and why are they so controversial?

You may be familiar with the rush of satisfaction that comes from popping open a virtual treasure chest and being rewarded with an uncommon, rare or even legendary item that you can use to gain in-game advantages. But you’ve probably also felt the sting of frustration when another player beats you to it, or when the few chests you do manage to find contain nothing of significance. Some players just don’t have the time or effort to endlessly grind for them. So, what do they do instead? They buy a loot box – a video game mechanic that gives players random in-game items, including costumes, weapons, or even characters, in exchange for real money or in-game virtual currency.

However, loot boxes have also been criticised for being predatory and addictive, and for encouraging players to gamble with real money with no guarantee that they will receive the items they want. A report by the Gambling Health Alliance said one in four 11-16 year-old gamers spend over £100 on loot boxes during the course of a game, with one in six young gamers having taken money from their parents without permission to fund the purchase of loot boxes. Almost a third said they struggled to keep track of how much they spent, with a similar percentage admitting they didn’t feel in control of their spending.

The random nature of the rewards can create a gambling-like loop, where players keep spending money in the hope of getting the items they want. Younger players, who may be more vulnerable to addiction and less likely to understand the impact their habit is having on them, are especially at risk.

The 11 new Industry Principles on loot boxes

Following the UK government’s formal response to its 2020 call for evidence on loot boxes, which was discussed in more detail in another of our articles, Loot boxes: UK government says no to regulation, the UK games industry trade body has published 11 new Industry Principles on loot boxes as a form of self-regulation. We have included the principles at the end of this article for ease of reference. These principles are designed to improve protections for all players and to ensure that loot boxes are used in a responsible and ethical way, with transparency and the availability of parental controls at the forefront of their strategy. UKIE also launched a £1 million, three-year public information campaign to support parents and provide guidance on how to use parental controls to restrict and manage in-game purchases. Another of the principles centres around committing to clear and lenient refund policies where loot boxes or in-game currency have been purchased without parental consent or knowledge.

What do the new principles mean for gamers and developers?

The new principles mean that game developers will now be required to be more transparent about the odds of getting different items from loot boxes, giving players a better understanding of what they’re getting into before they spend money.

Game developers will also have to be more vigilant in identifying and preventing the underage purchase of loot boxes, which could involve requiring players to provide proof of age and making parental controls harder to bypass. However, with this could create new challenges around data protection and the practicality of such measures.

Is self-regulation enough?

Whether self-regulation is enough to address the concerns surrounding loot boxes remains to be seen. The new Industry Principles on loot boxes are generally considered to be a positive development, but how (or whether) developers will adhere to them in practice, and the level of impact they will actually have, is yet to be determined.

One of the key concerns is that self-regulation is voluntary, and there is no guarantee that all game developers will adhere to the principles or do so in a way that maximises the public benefit, especially since it can conflict with companies’ commercial interests. Self-regulation can be effective (see, for example, the influence of the Advertising Standards Authority in enforcing the UK’s self-regulatory advertising regime), but it is important to have strong oversight mechanisms in place. This could involve independent audits of game developers’ compliance with the principles, as well as financial penalties for non-compliance.

Additionally, the principles themselves are relatively broad, and there is room for interpretation. For example, the principle of “transparency” doesn’t specify how much information developers must disclose about loot boxes, or in what format. This potential for disparity amongst developers has been demonstrated by findings that just 1 in 75 UK games companies display the probabilities of getting particular items prominently on the in-game purchase page; and recent rulings by the ASA demonstrate how confusing some developers find the rules in this area. It’s also important that commitment to transparency includes a commitment to educate players about the risks of loot boxes and how to make informed decisions about whether to purchase them. In-game warnings and public awareness campaigns could help to achieve this.

Overall, it’s too early to say whether self-regulation will be enough to address the concerns surrounding loot boxes, and whether the new principles are effective will depend on how they are applied in practice, and how compliance with them is measured. If it transpires that self-regulation is not effective, then governments may need to consider legislative intervention.

The 11 Industry Principles on loot boxes

1. Make available technological controls to effectively restrict anyone under the age of 18 from acquiring a Loot Box, without the consent or knowledge of a parent, carer or guardian.
2. Drive awareness of and uptake of technological controls with all players, parents, carers and guardians through regular communications, starting with a targeted public information campaign launching in July.
3. Form an expert panel on age assurance in the games industry. The group will meet regularly to develop and share best practices, stay apprised of technological developments and explore opportunities to develop improved systems, engaging with relevant regulators and policymakers where necessary as well as consulting with players, parents and caregivers and third-party organisations.
4. Disclose the presence of Loot Boxes prior to purchase and download of a game so that players can make informed choices.
5. Give clear probability disclosures, making sure that players can easily access clear and simple information on the probability that they will receive given virtual items or categories of virtual items or other elements in a Loot Box before they acquire or open it. Players should also be informed if their data is used to influence gameplay experiences with Paid Loot Boxes, and given relevant details.
6. Design and present Loot Boxes in a manner that is easily understandable to players, and which promotes fair and responsible play.
7. Support the implementation of the Video Games Research Framework, to facilitate the creation of better quality, data driven research into video games that adheres to the principles of open science while respecting data privacy and confidentiality.
8. Continue to tackle the unauthorised external sale of items acquired from Loot Boxes for real money and continue to invest in IP protection to combat such sales.
9. Commit to lenient refund policies on directly purchased Loot Boxes or purchased in-game currency used to acquire Loot Boxes where spending has occurred without parental consent or knowledge, with clearly displayed contact routes for customer services.
10. Advance protections for all players. Members of the working group are committed to providing all players with information about how to play responsibly and manage their spending effectively on Loot Boxes. The group will continue to engage with third party organisations, players, parents, and academia to benefit from their learnings and experience including any new research developed through the Video Games Research Framework.
11. Work with UK Government and other relevant stakeholders to measure the effectiveness of these principles following a suitable implementation period of 12 months. Members of the working group commit to a periodic review of these measures following their implementation alongside the UK Government in order to assess these measures, assess the effectiveness of public information campaigns and take into account further technological innovation in the sector.