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FTC will investigate whether video game loot boxes lead kids to gamble



Video game loot boxes are facing a fresh round of scrutiny from United States officials as the Federal Trade Commission is preparing to launch an investigation into the increasingly popular business model at the request of Senator Maggie Hassan of New Hampshire.

Loot boxes are virtual packages containing digital items for use in a specific video game; Most games sell loot boxes for real cash via micro-transactions, but some allow players to earn them by playing too. The items inside each virtual box are randomized, with odds of encountering each item set in advance by the developer. Especially rare items often come with really long odds. In some cases, the items inside a loot box can enhance the player's gameplay, creating an added incentive to spend real money to acquire a digital item faster.

Give the choice between paying cash for instant gratification and spending seven hours unlocking to digital item, many choose the former.
Supercell

Critics of the loot box business model compare the practice to gambling, because the odds of obtaining specific items are often unknown to the buyer, and the desire to find the rarest items can lead some players to continue spending money on a game with little return on investment As more video games adopt loot boxes and micro-transactions as a standard, lawmakers around the world have expressed concerns that children are being exposed to an entry-level form of gambling.


Read more:Regulators from more than a dozen countries are looking to crack down on 'loot boxes,' a controversial video gaming practice that could be too much like gambling


During an oversight hearing for the Federal Trade Commission, Sen. Hassan asked the commissioners to investigate loot-box practices to ensure that children are protected from habit-forming or addictive business models and that parents are informed about other potential negatives. Earlier this year Sen. Hassan wrote an open letter to the Entertainment Software Ratings Board asking the board to collect data on the use and revenue generated by micro-transactions in video games.

"Loot boxes are now endemic in the video game industry and are present in everything from casual smart phone games to the newest high budget video game releases," Sen. Hassan said during the hearing. "Loot boxes represent $ 50 billion industry by the year 2022 according to the latest research estimates."

FTC Chairman Joseph Simons agreed to investigate the loot-box model and issue a report.

Sen. Hassan's comments reference in April 2018 report from UK-based Juniper Research, which predicts that loot box revenue will grow from $ 30 billion this year to $ 50 billion in 2022. Juniper recommended that regulators step in to stop teen gamers from selling items scored in box loot or using them to gamble. Hassan also referred a survey of 2,865 11- to 16-year-olds from the UK Gambling Commission showing that 31% of participants had paid for a loot box or had used an in-game item to open a loot box.

However, in a statement given to GamesIndustry.biz prior to Monday's hearing, the UK Gambling Commission clarified that although 31% of the surveyed teens had used loot boxes, there was no direct correlation with gambling.

The Entertainment Software Association, which represents the political interests of American video game companies, issued the following statement in response to Sen. Hassan's comments:

"Loot boxes are one way that players can enhance the experience that video games offer. Contrary to assertions, loot boxes are not gambling. They do not have real-world value, players always receive something that enhances their experience, and they are completely optional They can improve the experience for those who choose to use them, but they do not have an impact on those who do not. "

The ESA also said that the ESRB already documents the presence of loot boxes and other interactive elements in video games. As of February 2018, games rated by the ESRB now carry an "in-game purchases" label when micro-transactions are present. Tools for parents to monitor the contents of their children's games are available at parentaltools.org.


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In September, the Gambling Regulators European Forum released a joint statement signed by officials from 15 European countries and the Washington State Gambling Commission reflecting concerns about the potential connection between loot boxes and games.

Some European countries have already implemented regulations on micro-transactions, leading developers to disclose the odds of winning each item included in loot boxes or discontinue their sale entirely. The Belgian investigation of popular games like "Overwatch," "FIFA 19," "PlayerUnkown's Battlegrounds," and "NBA 2K19" for their implementation of loot boxes ultimately sparked reform earlier this year.

Despite warnings from politicians and waves of consumer outrage, gaming companies are seeing larger percentages of their revenue generated from micro transactions every year. While some contend that buying optional loot boxes is ultimately an issue of player's choice, the concern from critics is that, like gambling, the issue is not knowing when to stop.


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