On August 7, 2019, the Federal Trade Commission (FTC) held a workshop examining consumer protection issues related to “loot boxes” in video games in Washington, DC. Loot boxes are digital containers of virtual goods that a user can purchase in-game using real-world currency or earn based on meeting certain in-game milestones. A user does not know what is in the loot box before purchasing. It may contain digital goods (such as character skins, tools, weapons, etc.) that the user can use in the game. Importantly, the user cannot choose the contents of the loot box. The box could contain an extremely rare/sought-after item, or the contents could be a collection of items already owned by the user (or somewhere in between).

Loot boxes are a form of micro-transaction that video game manufactures rely upon to offset the cost of game development, which, as explained in the workshop, has risen from tens of thousands of dollars to, in some cases, hundreds of millions of dollars. However, the FTC and other consumer groups are concerned that these transactions may come as a surprise to consumers (especially parents of small children) if they are not properly and clearly disclosed.

The FTC’s workshop brought all sides of the industry together to discuss issues related to micro-transactions, with a focus on loot boxes. The workshop comprised multiple panels and a mix of panelists from throughout the industry. The first panel gave an overview of the video game landscape, including an overview of micro-transactions and their effect on consumers and video game manufacturers. The second panel featured an academic analysis of motivations for loot box spending, discussing multiple studies related to in-game micro-transactions. The final panel discussed possible methods for and the inherent difficulties of disclosing micro-transactions.

When summarizing the workshop during her closing remarks, Mary Engle, the associate director of the Division of Advertising Practices for the FTC, identified many of the issues discussed during the day-long workshop, including:

  • Potential for addictive behavior and correlation with gambling behavior.
  • Possible predatory behavior that relies on the use of statistics/knowledge of consumer behavior to enhance the likelihood that a consumer will engage in a micro-transaction.
  • Dark patterns that include rewarding longer periods of time playing the game, appointment dynamics, and pay-to-win transactions.
  • Difficulty understanding the cost of loot boxes in real currency as compared to virtual currency.
  • Difficulty understanding the odds of winning particular items.
  • When, where, and how to disclose information related to micro-transactions.

These issues should be top of mind for those in the video game industry, as they appear to be noteworthy to the FTC. Throughout the workshop, the FTC stated that it will be keeping the public record on these topics open until October 11, 2019. So if you or your organization wish to file comments related to any of these topics, you can do so at https://www.regulations.gov/docket?D=FTC-2019-0021.

It is currently unclear what if any actions the FTC will ultimately take as a result of its look into micro-transactions/loot boxes. However, as micro-transactions continue to be scrutinized, it will be interesting to see what if any enforcement actions are taken against those who fail to adequately disclose the cost of micro-transactions to consumers.

The webcast of the workshop can be found at:

Session 1 (https://www.ftc.gov/news-events/audio-video/video/inside-game-unlocking-consumer-issues-surrounding-loot-boxes-session-1)

Session 2 (https://www.ftc.gov/news-events/audio-video/video/inside-game-unlocking-consumer-issues-surrounding-loot-boxes-session-2)