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Parliamentary committee recommends banning loot box sales to children

Report proposes industry tax to fund research into the harmful effects of gaming, slams "wilfully obtuse" industry representatives

The British government should regulate loot boxes under gambling law, a parliamentary inquiry has recommended.

After nearly nine months of evidence gathering, the Digital, Culture, Media and Sport (DCMS) Committee today published its 84-page report into immersive and addictive technologies.

Chief among its list of recommendations were that paid loot boxes should be regulated under gambling law, and there be a ban on selling them to children.

The inquiry took evidence from all corners of the industry -- including developers, trade bodies, and academics -- and reported a "lack of honesty and transparency" among social media and game company representatives.

DCMS Committee chair Damian Collins MP said it was time for gaming and social media companies to be more responsible, and challenged the government's current stance that loot boxes aren't gambling.

If the government wants to maintain that position even in light of the DCMS report, the committee said it should publish a paper explaining why loot boxes are exempt from the Gambling Act.

The committee noted that evidence around the potential harms of simulated gambling on children remains thin, and therefore recommended a precautionary approach going forward.

Additionally, the committee suggested that the UK government should advise PEGI to apply the existing gambling content label, and corresponding age limits, to games that feature loot boxes or similar mechanics of obfuscation and chance.

Aside from loot boxes, the scathing report recommended the games industry take responsibility for protecting players against potential harms and support independent research on the "long-term effects of gaming." It also expressed "serious concern" at the lack of robust age-verification systems.

Following the formal classification of gaming disorder by the World Health Organisation earlier this year, the committee also suggested the department should begin working with independent researchers immediately -- funded in-part by an industry tax -- and with game companies sharing aggregated player data.

The sharing of data for research purposes was something academics called for during the inquiry. When giving evidence to the committee in June, it was a sentiment echoed by King Digital head of portfolio and new games, Alex Dale, albeit with the caveat that data is "subject to normal commercial protections."

Commercially sensitive data proved somewhat of a sticking point throughout the evidence gathering process, with many game companies -- particularly Epic Games -- leveraging it as avoidance strategy when asked questions about typical player-spend and playtime, a tactic which saw MPs describe gaming companies as being "wilfully obtuse."

"Gaming contributes to a global industry that generates billions in revenue," said Collins. "It is unacceptable that some companies with millions of users and children among them should be so ill-equipped to talk to us about the potential harm of their products."

This attitude rankled Collins, who told GamesIndustry.biz back in June that game companies were "waiting to be told what to do by others" and only "paying lip service" to the problems.

Making comparisons to the gambling industry, it was noted that the games industry has "not sufficiently accepted responsibility for either understanding or preventing this harm."

Committee members paid particular attention to protections for vulnerable people during the inquiry, and the report shows that industry assurances fell short, as companies were "generally reluctant" to accept responsibility for player well being, or intervening if someone demonstrated abnormal spending.

The report even cited evidence that "gaming is several years behind gambling in relation to protecting the vulnerable" and highlights instances of people spending thousands of pounds on games like RuneScape and FIFA.

Finally, the committee suggested there may be need for legislation to protect children from playing games that are not appropriate for their age. This was born from a concern that companies are not enforcing age restrictions -- palming responsibility off to platform holders -- and inconsistencies around age-rating systems for online games, which are not legally enforceable.

UKIE CEO Dr Jo Twist said the trade body will review the recommendations with "utmost seriousness."

Although Dr Twist didn't specifically mention loot boxes, she said UKIE will consult with industry stakeholders on how to "demonstrate further our commitment to player safety."

"We have consistently been in dialogue with government and other key partners about establishing an appropriate research framework and will continue to do so," Dr Twist added.

"We are pleased the Committee acknowledges that the majority of people play video games in a positive, safe and responsible way. 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."

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Latest comments (21)

Klaus Preisinger Freelance Writing 11 days ago
Imagine school kids in 50 years struggling to find an answer to the question of what was the only vote Boris Johnson won in parliament during his time as prime minister? (I know, not going to happen that fast for the recommendation to come up for a vote),
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Orochimaruh Gaming since '82 11 days ago
Great news and a step in the right direction. Hopefully the DCMS report will urge governments to regulate the wild-west chaos, that is gambling in video-games.

Some publishers behave like street thugs using rhetoric like "surprise mechanics" and "just like kinder eggs" to hide the simple truth - it's gambling.

Additionally ESRB and PEGI needs to be updated, to reflect the reality of gambling in video games, and help parents decide what's best for their children.
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Harry Debelius Localization Project Manager, Keywords Studios10 days ago
Great, great news. Hopefully this will become a EU widespread law.

"lack of honesty and transparency" and "willfully obtuse" are excellent descriptions of how the major publishers in the industry behave on this issue.

I would even go farther: How the hell does PEGI exclude loot boxes from their gambling category? The fact it's self-regulated, and that some of the major publishers have board members, is proving unreliable for consumers. NBA 2k20 still has an E/3+ rating despite the blatant presence of gambling mechanics with real money; Imo, PEGI is the one to blame most here.
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Show all comments (21)
Robin Clarke Producer, AppyNation Ltd10 days ago
I think it's completely reasonable to ban games with loot boxes from being marketed to children. More research is also welcome.

(Of course, for this policy to be consistent, there should be far greater restrictions placed on actual online casino advertising, but of course that's not going to happen.)

This issue being used as a trojan horse to push through statutory age ratings for games would be totally unacceptable.

It's odd that to see the trade press laying into games companies who are being asked to defend their sector against unevidenced claims by tabloid newspapers. If they flatly deny their products are harmful they're branded evasive; if they humour the assertion that loot boxes are gambling by the legal definition (they aren't), this is interpreted as an admission of guilt. The house always wins, as it were.
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Ian Griffiths Product Owner, Hutch10 days ago
What's interesting here is classifying these digital goods as having money's worth. That's really opening a can of worms. From the report - https://publications.parliament.uk/pa/cm201719/cmselect/cmcumeds/1846/1846.pdf
"would need a change in legislation, but also in doing that you would have
to be very careful not to catch lots of other activities, which may also
incorporate expenditure, chance and a prize of value or worth to the player.167"
It sounds like they want the government to consider loot boxes games of chance, how things like blind box toys would escape such an inclusion is unclear, I guess they could make the 'digital' distinction. I'll be interested to see how games companies respond to such a proposal.
From the report:
"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"
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Brendan Sinclair North American Editor, GamesIndustry.biz10 days ago
@Ian Griffiths: If companies can build their businesses around selling digital goods, I don't see how we can argue that those goods don't have monetary value. That might have knock-on effects on laws that never considered an online world, but I the answer would seem to be to update outdated laws for the world we're living in rather than abide by them despite their unsuitability for that world.
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Ian Griffiths Product Owner, Hutch10 days ago
@Brendan Sinclair: You don't actually buy a digital good, you purchase a licence to use a digital good within the service, hence why you can't sell it on etc.

It's not that the goods aren't considered valuable by the player and the developer, more that if it's considered to be 'money's worth' that definition complicates a lot of other things under British law.

Essentially you could get into all kinds of strange areas, like Gold farming would actually be generating new money, not through a grey market but an officially recognised one. How would taxes work around it? What if the goods went up in value? Would the consumer have the right to sell it? Would it have to be transferable to another service? If it's money's worth, is it an asset that you have to declare? What would the taxes on it be? Could it be ensured? And so on and so on. I don't know the answers to these questions, maybe some of them aren't relevant or are non-issues. Nor am I saying that we shouldn't update regulation around these things, only that this approach is, well, a can of worms.
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Ian Griffiths Product Owner, Hutch10 days ago
My frustration with this process is the end steps.

1. Consumers complained about loot boxes
2. Regulators decided to investigate them and collect evidence from industry bodies, consumers, academics etc (I take issue with the name of the panel including 'addictive techologies', seems like they had made their mind up already)
3. The academics said they didn't have evidence of a problem but there are indications that there could be
4. The games companies said - we don't see evidence of any problems, we choose not to interfere with how people choose to play games in their own time, that's a private decision
5. The panel scoffed at this, essentially saying - how could you not see a problem here, it's obvious there is one (let's be honest though, it's far from obvious that there is, or at least that it's not trivial compared to the upsides of games)
6. The panel goes straight to government and says - here's how you should regulate.

I think what would have been better would to assume that there wasn't bad faith on the part of developers, maybe they really didn't think there was a problem and then give them a chance to address them.

Had the panel said to the industry, okay here's what we see, you've got 12 months to come up with and implement changes that will address these or we will recommend legislation to the government.

That way the industry could have had time to understand what the panel was expecting of them and come up with solutions that addressed it. Instead what we've got is the heavy boot of government on our throats now saying things like - games are harmful you need to mointor your players and tell them when to stop playing. Oh, and we want to consider loot boxes gambling now which places some ridiculous burdens like having to do money laundering checks even though no one can cash out. It's all very sensationalist and not particularly practical.
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Anthony Gowland Director, Ant Workshop10 days ago
Anyone in the industry who hasn't seen this coming for at least the last year must have had their head in the sand. "The industry" has had plenty of time to understand what standards players, parents, and governments expect from them, but has decided to do the bare minimum, or play at semantics ("surprise gameplay" indeed).
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I don't want to see a ban either (and certainly not a general tax on everybody) but surely much of this happened because the industry played "I know nothing, me" with a government panel who could put them out of business. As an adult I pay for loot boxes but I'm well aware that I'm gambling when I do it. Perceived value is enough, whether the item has real-world value or I can sell it on doesn't change it into not-gambling.
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Eddie In Product Manager - Games, Mobile, Boss Fight Entertainment10 days ago
Diablo 3, without the cashout feature, was labelled with the gambling tag, effectively making the game 18+ by the Korean government because they believe the addictive core loop of going into a dungeon for a random drop of an item with perceived value was gambling. I'm sure most of us here can agree that this is preposterous. This is what happens when you get sucked into the perceived value part of the argument and allow the state to be the judge.

Furthermore, if you establish that in-game items have monetary value, the industry opens itself up to class action lawsuits every time they release a balance patch, or items go missing on the server or a game shuts down. As Ian said above, this is a massive can of worms.

The fact that the content of a loot box is compelling and worth something to users isn't the issue but I feel that a lot of research is fixated on the addiction part of it. Don't confuse compelling and fun with addiction.

The issue therefore is not the loot box itself, it's the monetization. This is why the discussion should be around stricter control of payment platforms and better age verification.

Edited 1 times. Last edit by Eddie In on 12th September 2019 6:09pm

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Ian Griffiths Product Owner, Hutch10 days ago
If payment platforms had some kind of age verification that they could pass to devs then devs would happily restrict purchases to 18+

The issue is with expecting devs to handle age verification for each specific game. This would massively increase the burden to operate especially for new entrants.
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Ian Griffiths Product Owner, Hutch10 days ago
@Barry Meade: I don't think they played a 'I don't know nuffin' game, I literally think there's a flat out difference of opinion.

For example, the DCMS panel was surprised that there aren't spending limits for players, they assumed this was done in bad faith to maximise revenue from players. They were literally stunned by the idea that devs didn't think there should necessarily be a limit, that a limit is common sense, but it's really not. Like, what should be the limit for alcohol bought in a month? Or what should be the limit for buying a car? Or a house?

The notion that someone is spending 'too much' on a hobby is entirely subjective the amount amount wholly arbitrary. Not to mention a limit would be ineffective, what is affordable for one person is unaffordable for another, it's not like we can reasonably check your bank account and spending to see what you can afford, first that's not actually possible but second, it would be a gross violation of a player's privacy.

There's definitely an underlying nanny-statism ideology coming from the DCMS around this stuff. Their recommendations are by no means limited to loot boxes or even monetisation. They're talking about montioring player's play patterns with the intention of intervening in their lives. I really don't think there's a mandate for this but the overreach here is palpable.
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Klaus Preisinger Freelance Writing 10 days ago
@Ian
If you farm gold and sell it for real money, then you just have to pay your taxes like any other business. The tax authority does not exist to enforce end user licence agreements, it simply wants its cut. One would have to expect no repercussions on this end.

I disagree on the nanny state notion. Regulations are a tool to enforce common sense. We wouldn't need regulations, if we were all able to make informed decisions on everything. But we cannot make informed decisions on everything. For one reason, no customer is an expert on everything and not all providers are honest. This problem is solved by organizing people who can hold providers accountable to common sense, i.e. regulatory enforcers. As a result, you do not have to be an expert on everything to make informed decisions on everything. Regulations provide common sense for everybody
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Ian Griffiths Product Owner, Hutch10 days ago
With gold farming you have to pay taxes because you sold something for money. If all digital creations have money's worth then it would have value whether you sell it or not. That is a small part of a bigger can of worms.

When I talk about nanny statism as an attitude from the panel I think I'm being fair. This report suggests that devs and social media platforms should monitor their user's interaction patterns and intervene when they see any 'worrying patters'. This is almost a de facto definition of nanny-statism.
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Klaus Preisinger Freelance Writing 9 days ago
@Ian
In the name of security, it is safe to assume politicians will abandon any notion of privacy, like they have in the past 20 years. To that end, any and all information by the tech industry will at some point be acquired and re-appropriated.

The report comes from a world in which liability and accountability do not ask how you got an information, but only whether you acted upon it or not. This is what kills the notion of privacy.

Technically, this goes further than being a nanny state, this approaches territory of recruiting anybody who collects data to become a part of a legal process that includes responsibilities of essentially spying and then snitching on people. We find this totally acceptable when it comes to the flight data of every person on the planet and as a result, this level of expected compliance will be what is expected of other industries in the future.

But at least we will be sending out counselors to people based on meta-data analysis and not just hellfire missiles like we do now. That is what progress is all about.
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@Ian Griffiths: In theory, yeah, maybe. But there's a certain point at which playing a game is objectively not worth the money, or at least, to a Government panel that can only judge objectively, it looks less like crazy enjoyment and more like problem spending. If someone is paying thousands into a game where 95% of the gameplay is free I don't think it's a surprise for outside observers to say "ok maybe this person is obsessive or has zero impulse control". We can (and should) make the argument that maybe this person is rich and paying $5000 for virtual cannonballs means nothing to them. But Governments rightly put seat belts in cars knowing there are expert drivers out there too. Loot boxes by definition are (a) designed to have a "one more go" appeal and (b) will sell to you ad infinitum as long as you have cash and (c) take advantage of the sunk cost fallacy to encourage (a). In Vegas they do allow grandmothers to empty their bank accounts into slot machines. Not sure allowing that outcome with virtual goods is the right path to go for games. I'm a libertarian on these issues in that I think adults should be allowed to do what they want. But make no mistake, I back F2P being open-ended in the same way I back adults being allowed to do heroin: fully aware it is risk-filled, potentially nasty and even abusive of certain mental states. I reserve my moaning about nanny states when they interfere in the innocuous. Gambling is not, at least not to me.
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Ian Griffiths Product Owner, Hutch5 days ago
@Barry Meade: There's no point at which a game is ever objectively not worth the money because both worth, and money are based on perception and hence entirely subjective.

I don't think a government panel can look at anything more objectively than anyone else. This panel has a clear bias for anecdote over evidence. This kotaku article covers it quite well - https://www.kotaku.co.uk/2019/09/12/the-dcms-committee-says-loot-boxes-are-games-of-chance

How do you define problem spending? To me problem spending is when someone consistently spends non-disposable income on something to the point where it starts to negatively affect their life in a non-trivial way. There's nothing unique about f2p in this way. People 'overspend' on everything from nights out to clothes and some even do so without impulse control. How much should we restrain the ability of all people to spend to protect the tiny minority of people who have impulse control problems?

An outside observer may think it's silly to put lots of money into a game, but that doesn't make them right. I think it's silly to spend millions on a violin but I don't question the mental acuity of someone who does because, well, I don't understand their interests and it's their business, not mine.

Seatbelts are in cars because there is evidence that they reduce deaths, considerably. This is completely different from restricting how someone spends money, but even in those cases we do have consumer protection legislation.

Loot boxes aren't by definition designed for those things. There is not an inherent 'one more go' built into a loot box unless you have an intention to get a specific thing from that loot box. The majority of spenders don't have one more go. Not all loot boxes are intended to be bought ad infinitum, a number have 'no duplicate' systems running though again, no capitalist enterprise is going to say no to you buying something if you have the money unless forced to do so by law. And no, loot boxes aren't designed to take advantage of the sunk cost fallacy, unless they're saying, 'oh why not try again you're bound to get it this time!'. Also, I wonder if you're more referring to the gambler's fallacy as the sunk cost fallacy is fairly specific, I frequently point out the sunk cost fallacy fallacy. In Vegas they can let people do what they like, it's no more related to what f2p is doing than it's related to what the stock market is doing.

That a game can let you spend all of the money means that it's like pretty much all other good or service in the economy; most economic enterprises will let you spend all the money you have. In fact, if you go to buy a car and other large items companies will sell you money you don't have to get hold of the product you want. Whether this is something you want to do is up to you as an individual, as long as you're well informed.

I don't understand why you're linking f2p with heroin as there is no link that f2p games or spending in f2p is in any way addictive. There is no evidence that f2p spending or f2p games have any harmful effect on people, it's purely based on anecdote. Loot boxes are not considered gambling in the UK or the majority of the world, nor has anyone shown them to be addictive. The problem we have is people mixing up the common parlance of something being addictive, like 'You should watch breaking bad, it's so addictive!' and the clinical diagnosis of problems of addiction.

If you're a libertarian I would expect you to moan about any and all government legislation around things like this as surely the government has no place in telling people what to do.

I complain about this because despite all of the investigation no one has shown them to be more or less innocuous than any other consumer good or service. But more importantly, I take issue with moving away from notions of personal responsibility. Right now I can binge watch all of my DVDs and no one can do anything about it - it's my business. Now, just because I can now do so digitally through a service does not mean that service has a moral right to spy on me and act as my guardian telling me when I've had enough, in fact, I'd go so far as to argue that it's unethical for the service to even try. I'd then go further and say the state is building up future problems through expanded surveillance and encourage an anti-fragile mindset in the population, but that's a much wider discussion.
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Hello Ian, I agree with a lot of what you say. Just FYI where I said the panel "can only judge objectively" I meant the panel can't subjectively inhabit the mind of the player to figure out if they are squealing with joy at the moment of spending. It wasn't an attempt to assert they're without bias - that would be daft. And I'm individually libertarian by nature or principle, I'm not politically Libertarian which is just anarchism for the rich, so I don't feel any duty to mindlessly side against the Government on any issue.
Back to the point, here we're more talking about strategy vs tactics than right vs wrong. A game affect players mental state directly so smashing an unlimited store into it where you can pay money to offset emotions is open to abuse. This is exactly the danger we all recognise with gambling: not everybody is rational in the face of it, so kids in particular are kept away from it everywhere. It doesn’t mean we should ban it; it does mean it comes with dangers. If big companies are going to attempt to represent the industry they should at least be aware of the power of that position as well as the duties of politicians who answer to their electorate. Recognise that swapping virtual goods (i.e pixels and some numbers changing on a database) for lots of real money may come with some baggage and that there is a problem – even if it’s a problem of perception – and act accordingly. What really does not help our industry get through these kinds of sticky situations is this wide-eyed innocence, surprised-you-could-think-that face the industry pulls whenever the safety of loot-boxes are debated.
These jokers almost had an industry tax put on us. Whether a panel of parents, judges or politicians you do not turn up and pretend there is no case to answer, you’re just directly antagonising them.
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Ian Griffiths Product Owner, Hutch5 days ago
@Barry Meade: I don't agree with you on all of these points but I do get your point.

Where I take issue is with the idea that we need to capitulate with 'ban this sick filth' politicians, who to me seemed to have already made their minds up, without protest. But I agree this wasn't the smartest thing if your goal was to minimise the chance of legislation.

Personally I don't have an issue with restricting paid loot boxes to 16 or even 18 year olds but the idea that every dev has to get a licence and check ID seems utterly ridiculous to me. I'd much rather we could have some sort of platform level verification of age.

There was always a kind of, tell us what you want and we'll look into it that I think we skipped. When you run into irrational fear of 'addictive gaming' it's hard to know what would be enough for these people. It sounds like spying on players and telling them when to go to bed is what the politicians were after. How their proposals fit the mission statement for the DCMS is beyond me, this legislation hardly gives our industry a global competitive advantage. But I think this is about ideology over reason.
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Ennio De Nucci Game Designer 3 days ago
Very good insights, I generally agree with @Ian's point of view.

What I find absurd in the loot boxes debate is that there are two problems that are put in the same basket and I think they should not.
1-Players can spend large amount of money on Loot Boxes (we should stop saying 'unlimited' because it's simply not true, a ceiling of even £100k is not 'unlimited'...)
2- Loot boxes might cause permanent harm on minors, exposing them to gambling and pushing into harmful habits

The first one, in my opinion, is not a problem at all, and to regulate loot boxes and the game industry because of that reason, would go against the very concept of liberalism on which most of our society is based. Children should not have access to unlimited amount of money and is their parents responsibility to make sure they don't.
If you give a kid a credit card without worrying how he or she is going to use it...the entire world becomes a dangerous place.
Online stores are already meant to be used by adults only. I don't see how rating a game 18+ would stop kids from playing it, if they even have access to an adult's payment method. ID verification from game companies? How? How do you ensure parents are not letting their kids play after their adult identity has been verified? (exactly like they let their kids use their credit card).


The second one is the real problem that worries me the most. Because that would mean that developers are harming their players without even knowing it.
Researches won't be conclusive until the teenagers of this decade become adults...and how could these studies isolate videogames as the cause, when we live in a world dominated by social media where 99% of the teenagers in the UK are online 20+ hours a week (https://www.ofcom.org.uk/__data/assets/pdf_file/0024/134907/children-and-parents-media-use-and-attitudes-2018.pdf).
So what can we do?
We can develop games that are fair! If we want loot boxes, we design them to be fun, not to milk money from our players. We put systems in place to help parents limiting their kids activity on our games (see the latest Pokemon Masters on iOS for reference). Is this self regulation? Maybe, to me is first and foremost good game design!
We stop copying the game economies from ultra-successful games (that might have gone a bit too far with their drop rates and monetization techniques - and it is absolutely their right -) and we develop our own, building trust with our players, based on the fairness of our value proposition and care for our audience.

But to see loot-boxes being banned like they were a scam, and see videogames (and the free to play business model) being crucified (AGAIN) and made the escape goat for parents (and society in general) to justify all the problems that kids might have in this complex generation. No thanks!

Edited 1 times. Last edit by Ennio De Nucci on 19th September 2019 3:17pm

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