UK government investigation slams games industry for a ‘lack of honesty and transparency’ about loot boxes

Following a nine-month investigation, the UK parliament’s Digital, Culture, Media and Sport (DCMS) Committee has today recommended the British government should regulate loot boxes under gambling law, accusing the games industry of a “lack of honesty and transparency”, giving the government grounds to “question what these companies have to hide”. 

Following an inquiry that took evidence from a range of industry representatives – including trade bodies, academics, senior games industry executives, and developers themselves – the 84-page report into immersive and addictive technologies made a raft of recommendations, including assertations that paid loot boxes should be banned in children’s games and be regulated under gambling law. 

While loot crates and microtransactions have been an industry staple for a number of years now, the loot mechanics in games like Star Wars Battlefront 2 and Overwatch has drawn the attention of gambling regulators elsewhere. Many countries like Belgium and the Netherlands have taken action in relation to gambling laws, and the United States Federal Trade Commission also indicated it would be investigating how loot boxes impact children.

However, UK Gambling Commission chief executive Neil McArthur informed the select committee last month that while there are “significant concerns” about the presence of loot boxes in video games that children play, as loot boxes themselves technically have no monetary value they do not qualify as a form of gambling under current laws.

When called to give evidence about loot boxes and gaming disorder, the committee stated many of the industry representatives declined to respond to some of the Select committee’s questions, including how long players play games for, citing they couldn’t respond without compromising commercially sensitive data. The committee called this a “wilfully obtuse” tactic to avoid scrutiny.

“We recommend that loot boxes that contain the element of chance should not be sold to children playing games, and instead in-game credits should be earned through rewards won through playing the games,” the report said. “In the absence of research which proves that no harm is being done by exposing children to gambling through the purchasing of loot boxes then we believe the precautionary principle should apply and they are not permitted in games played by children until the evidence proves otherwise.

“Loot box mechanics are integral to major games companies’ revenues and evidence that they facilitate profiting from problem gamblers should be of serious concern to the industry. We recommend that working through the PEGI Council and all other relevant channels, the UK Government advises PEGI to apply the existing ‘gambling’ content labelling, and corresponding age limits, to games containing loot boxes that can be purchased for real-world money and do not reveal their contents before purchase.

“We agree with the Gambling Commission that games companies should be doing more to prevent in-game items from being traded for real-world money, or being used in unlicensed gambling,” the report added. “These uses are a direct result of how games are designed and monetised, and their prevalence of undermines the argument that loot boxes are not a form of gambling. Moreover, we believe that the existing concept of ‘money’s worth’ in the context of gambling legislation does not adequately reflect people’s real-world experiences of spending in games.

“We consider loot boxes that can be bought with real-world money and do not reveal their contents in advance to be games of chance played for money’s worth. The Government should bring forward regulations under section 6 of the Gambling Act 2005 in the next parliamentary session to specify that loot boxes are a game of chance. If it determines not to regulate loot boxes under the Act at this time, the Government should produce a paper clearly stating the reasons why it does not consider loot boxes paid for with real-world currency to be a game of chance played for money’s worth.”

The highly critical report also stated the games industry should do more to protect players against potential harms and support independent research on the “long-term effects of gaming”, reflecting upon the WHO’s recent agreement to list gaming disorder as an official addictive disorder in the 11th International Classification of Diseases (ICD-11). 

The report also reflected on “an enduring gender imbalance in the games industry’s workforce”, stating that whilst “roughly the same number of women as men play games” and 31 per cent of the esports audience is female, just 12% of game developers are female. It concluded the games industry’s attempts to tackle the gender imbalance in the workforce “echoes its approach to understanding and tackling the potential harms of its games on players: while some take their responsibilities seriously, others could be doing much more”.

“The video games industry has always, and will continue to, put the welfare of players at the heart of what we do,” Dr Jo Twist OBE, CEO of UK Interactive Entertainment said in response to the report’s findings. “We will review these recommendations with utmost seriousness and consult with the industry on how we demonstrate further our commitment to player safety – especially concerning minors and vulnerable people.   

“It is important that we keep engaging constructively with a range of stakeholders, including MPs, regulators and law enforcement agencies because we support an evidence-based approach to modern policymaking. We have consistently been in dialogue with government and other key partners about establishing an appropriate research framework and will continue to do so. 

“We are pleased the Committee acknowledges that the majority of people play video games in a positive, safe and responsible way,” Twist added. “The industry does not dispute that, for a minority, finding balance is a problem. This is why we are vocal in supporting efforts to increase digital literacy and work with schools and carers on education programmes.  

“We also welcome the Committee’s recognition of good practice, which already exists in the industry, including pioneering community management and technical measures which ensure players have a safe experience online.

“The discussion around age ratings is actively ongoing and the system is continually reviewed,” Twist concluded. “Changes have already been made including the introduction of an in-game purchase description label and as technology evolves so will the robust process by which it is reviewed and rated.” 

Industry veterans called on the global games industry last year to take action on loot boxes in video games “before it’s too late”. Executive director of the IGDA, Jen MacLean, also issued an industry-wide call-to-action in response to the United States Federal Trade Commission’s announcement it was launching an investigation into loot box monetisation.

“By not taking significant action as an industry and global game developer community to self-regulate how loot boxes are used, we run the very real risk that governments around the world will take that action for us, and perhaps create significantly restrictive laws that could impact any random reward elements in games,” MacLean said. “I offer my strongest advice to game developers and interactive entertainment businesses on this matter: addressing how loot boxes are used is both the right thing, and the smart thing, for the global game development industry to do.”

In a joint statement via The Entertainment Software Association, Nintendo, Microsoft, and Sony have announced new initiatives designed to aid consumers in making “informed choices” about their purchases, including information about loot boxes. 

Whilst there are no concrete details on when the plans will be implemented, the three hardware developers have confirmed they will “require” game developers releasing games on their platforms to disclose information about the “relative rarity or probability of obtaining randomised virtual items” by 2020.

About Vikki Blake

It took 15 years of civil service monotony for Vikki to crack and switch to writing about games. She has since become an experienced reporter and critic working with a number of specialist and mainstream outlets in both the UK and beyond, including Eurogamer, GamesRadar+, IGN, MTV, and Variety.

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