The Department for Culture, Media and Sport (“DCMS”) has welcomed guidance published by the games industry trade body, UK Interactive Entertainment (“Ukie”), that is set to implement industry-led protections for loot boxes.
From gambling regulation to industry-led guidance
The randomised nature of loot boxes has long prompted questions in the UK as to whether they should be regulated as gambling products. In 2019 the DCMS published its Report on Immersive and Addictive Technologies in which it concluded that the sale and purchase of loot boxes should be considered gambling and therefore regulated under the Gambling Act 2005 (“Act”). Following a 22-month consultation, (which formed part of the Government’s wider review of the Gambling Act) the Government announced in a U-turn that loot boxes in video games would not be banned under the Act or regulated through other means at that stage. Instead, the Government resolved to adopt an industry-led approach to improve protections for children, young people and adults (the reasons for which we summarised in our article here).
Delivering on its promise, the DCMS convened a Technical Working Group of games industry representatives to engage with players, parents, government departments and regulators to consider how to improve protections for children and adults in respect of loot boxes. This saw the Information Commissioner’s Office (“ICO”), the Competition and Markets Authority (“CMA”), academics, tech companies (Microsoft, Google and Nintendo, amongst others) and organisations in the industry (including video games developers Take2, EA and Activision) coming together, as well as a “Player and Parents Panel” convened by the Games Ratings Authority (“GRA”), to facilitate feedback on industry-led proposals.
11 new principles
What has emerged from this industry-led engagement is the development of 11 new principles by Ukie, aimed at mirroring the objectives set out in the Government’s response. We consider these can be grouped into three broad categories: (i) managing age assurance; (ii) design-led fair and responsible play; and (iii) industry implementation.
Managing age assurance:
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. 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.
The DCMS has called on the industry to increase and monitor the uptake of parental controls. The principles set a clear commitment to using technological controls to restrict young people’s access to loot boxes. For game developers and platform providers, the principles highlight the need for improved age assurance to underpin parental controls, rather than relying on self-declaration, and this presents an opportunity for stakeholders to develop effective tools to do that. The DCMS acknowledges the inevitable limitations of parental controls and welcomes the use of refunds as an important “backstop” to mitigate the risk of financial harms associated with loot boxes.
Design-led fair and responsible play:
3. Launch a three-year public information campaign.
4. Disclose that games include loot boxes before a game is downloaded so that players can make an informed choice.
5. Give clear probability disclosures on what gamers are likely to receive in loot boxes.
6. Design and present loot boxes in a way that is more easily understandable and promotes fair and responsible play.
7. Advance protections for all players by providing information about how to play responsibly and manage spending effectively.
The principles in this category appear to draw from consumer law rules to encourage presenting loot boxes in a way that is easily understandable to players. The DCMS has said it wants to see the industry implementing measures that communicate to players clearly and transparently how their data is being used to inform loot box probabilities and highlights that Ukie is prepared to launch a £1 million public information campaign on safe and responsible play to emphasise the risk of harms associated with loot boxes.
8. Form an expert panel on age assurance in the games industry to meet regularly to develop and share best practices and explore opportunities to develop improved systems.
9. Support the implementation of a 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.
10. Commit to tackle external illegal sales of items acquired from loot boxes for real money and continue to invest in IP protection to combat such sales.
11. Working with the Government and other relevant stakeholders to measure the effectiveness of these principles.
Whilst welcoming the principles, the DCMS notes that the decision to adopt industry-led rather than legislative measures remains under review and will be informed by how effectively the principles are implemented. The principles set out above establish an agenda to continue measuring, scrutinising, and building on the evidence base for loot boxes in video games. Alongside this, the DCMS published a Video Games Research Framework in May 2023 to work with academics to measure (a) the effectiveness of the implementation of industry-led protections; (b) how widely these protections are being adopted across the sector; and (c) how best to ensure player safety with regards to loot boxes.
The current position aligns with the Gambling Commission’s view that the Act does not cover loot boxes and it therefore cannot use any of its regulatory powers to take action. We queried in our previous Law Now article whether this would change once the long-awaited White Paper had been published, but it has not. In its press release, the DCMS acknowledged that some players, parents, organisations and parliamentarians will be disappointed that the Government has not taken legislation forward to restrict children’s access to loot boxes. However, the DCMS notes that an industry-led approach will, at least in the first instance, avoid the risk of unintended consequences from making legislation on loot boxes, that will remain more adaptable and keep pace with the dynamic environment of the gaming industry. Legislative measures are not totally off the agenda – the DCMS has said it will continue to review the risks and monitor developments in other jurisdictions (see our Law Now article on other emerging approaches here). As the evidence base grows, particularly through the Video Games Research Framework, there’s a possibility that the direction could change in the future.
The Government has welcomed the 11 new principles as setting a clear direction for how the industry should treat loot boxes. However, it will be interesting to see how the guidance works in practice, as the games industry, players, parents, academics, consumer groups and government organisations begin to interact with and implement it. The DCMS has said it will monitor the industry-led measures and has asked the industry, co-ordinated by Ukie, to report back to the DCMS on how the guidance has been implemented and what further work is needed.
The DCMS will provide further updates on progress of these industry-led measures after the 12-month implementation period.