EU report says loot boxes a consumer protection matter

A new study is saying that loot boxes should not be approached from a gambling perspective, but rather from a consumer protection one.

The study, titled “Loot boxes in online games and their effect on consumers, in particular young consumers,” was conducted on behalf of the EU Internal Market and Consumer Protection (IMCP) committee. It represents one of the most comprehensive investigations into loot boxes to date.

The study outlined “problematic design features” the current monetization and engagement mechanics used in the industry. It states that these mechanics create an “irresistible urge to play” and a “growing tension that could only be relieved by playing,” while sharing many characteristics with gambling.

Loot boxes present “real gambling-like activities”

The IMCP report noted that the design features in loot boxes present “very real gambling-like activities” that use “well-documented behavioral bias—systematic pitfalls in behavior compared to how rational and well-informed consumers should behave—to sell content.”

Some of these features can also become problematic for players as they’re designed to prolong gaming sessions and might motivate players to repeatedly spend money on loot boxes—resembling addictive techniques applied in casino gambling. Examples of the latter include NBA 2k20, which makes no effort to hide how much like a casino its loot box system is.

“Some reward structures and presentation features might mislead players regarding the likelihood of receiving valuable items and could promote addiction,” states the report. “These issues could be alleviated through responsible game design which refrains from using proven addictive features.” 

The study also acknowledges that attempts to limit access to loot boxes and other problematic design elements through gambling legislation have been somewhat hamstrung.

While several EU countries have tried to move against the practice, the union has yet to come together on a ruling.

Legislating loot boxes as gambling hasn’t been effective

European governments have been some of the most aggressive when it comes to attempting to regulate loot boxes as gambling. Just last month, the UK’s House of Lords made the call to reclassify the practice as such, with the intention of eventually regulating it.

Other countries within the European Union have already passed laws to this effect. Belgium has already stated that loot boxes fall under the purview of their gambling laws, while the Netherlands has outright called the practice illegal.

The effectiveness of these measures, however, has been questionable at best. Companies such as Electronic Arts and Blizzard have resorted to simply disabling in-game currency in accordance with the laws of these countries while keeping them active elsewhere—hardly the ideal solution for the problem.

Part of the problem is that regulatory and legal frameworks across EU member states are “not sufficiently harmonized” for a Union-wide initiative to be possible. As a result, the European Commission has yet to directly address the issue of loot boxes, choosing instead to issue several recommendations about protecting minors against gambling.

In addition, any attempts at legislation are seen as falling behind industry practices. This has already happened with the adoption of battle passes over loot boxes as a form of monetization in games such as Fortnite. This model—which has players buying limited time battle passes which they then level up to unlock rewards—is seen as favorable to both consumers and publishers alike, as it removes the gambling element of loot boxes. 

However, battle passes aren’t totally free from criticism, with some coming under scrutiny for how much they monopolize a player’s time.

In light of this, the report states that, instead of legislating loot boxes and other problematic design elements under gambling legislation, efforts should instead be focused on consumer protection. It recommends that protective measures be introduced at multiple points in the consumer journey.

The report stated that these measures should start by “balancing out the asymmetry in information between players and publishers.” This includes raising consumer awareness about risk, disclosing probability and establishing robust refund policies. 

“While consumer information, transparency and player control measures are certainly welcome initiatives, it is recommended that their effectiveness is systematically verified, for example through consumer testing,” reads the report. “It also needs to be made sure that such measures are supervised and enforced by independent bodies.”

Over the years, a number of moves have been made to address the issue of loot boxes this way. For one, European video-game rating system PEGI has introduced a new warning label for in-game transactions. Meanwhile, Apple not required games on its App Store to disclose loot box odds.

The recommendations made by the ICMP report could push for a further shift in this direction for dealing with loot boxes. This could present a major shift in regulatory tactics away from a laser focus on gambling legislation, to a more holistic approach that directly addresses the “harmful effects on players” of certain mechanics.