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FTC Peeks Inside a Loot Box

With the rise of online gaming and free-to-play games, loot boxes have become a staple in the gaming industry. While originally introduced as in-game purchases for titles that were already free on their own or as a form of early DLC for players to get exclusive items, they have since transformed into a cash grab. This has led to the creation of many games with a “pay-to-win” model, garnering much criticism. For example, when Electronic Arts (EA) came under criticism for their insistence on the use of microtransactions in Star Wars Battlefront II, they hosted an AMA on Reddit to answer questions, leading to the most downvoted post in the history of the site.

FTC Peeks Inside a Loot Box
Courtesy of Blizzard Entertainment

Loot Boxes are so controversial that even the federal government got involved. In 2019, the Federal Trade Commission (FTC) hosted a workshop in Washington, DC on video game loot boxes and related microtransactions. According to their staff report released in August of this year, the goal of the workshop was to highlight several issues, such as “the role of microtransactions and loot boxes in the video game marketplace, public concerns about these monetization systems, emerging academic research on loot boxes, and ongoing industry self-regulatory initiatives.”

The 12-page report summarized the panel discussions and provided key takeaways, highlights, and research. It started off with an introduction and overview of loot boxes and micro transactions, stating their origins before eventually covering their nuanced evolution.

The reason for the workshop and accompanying report was the growing concern around loot boxes and microtransactions and their relationship to gambling and impacts on children. This issue surrounding loot boxes has been the talk of several policies in countries around the world. Sweden has investigated the subject, while Belgium has outright banned their use for violating the country’s gambling laws. Enter the United States, where Senator Josh Hawley (R) introduced a bill in 2019 calling for loot boxes to be banned. This prompted an investigation into the subject to determine whether a law governing trade and commerce practices, overseen by the FTC, would be needed.

Through their investigation and workshop, the FTC raised concerns regarding loot boxes and microtransactions and fielded questions from the community. They took into account both sides of the issue. One one hand, you have the evolution of loot boxes leading to what is essentially gambling, but allowing people under 21 to participate. On the other hand, it is a way for gaming companies and developers to make money, especially in games they release for free, such as Call of Duty Warzone.

The FTC offered numerous recommendations for change, many of which gaming companies have already enacted before this workshop. Some proposals have not been enacted, such as the possibility of rating games that contain loot boxes with an M or AO rating, while others are already in the works, such as the Entertainment Software Association (ESA) requiring all developers to release loot box odds by the end of 2020.

At their conclusion, the FTC stated, “The video game monetization system is a complex space that incorporates a wide range of mechanics.” As such, there are mixed discussions on the necessity for government regulation, but a general consensus is that more research needs to be conducted. The workshop did provide answers for consumers and help gaming developers take steps in the right direction for self-regulation. For now, “The FTC will continue to monitor developments surrounding loot boxes and take appropriate steps to prevent unfair or deceptive practices.”

If you’d like to read the report for yourself, you can check it out here.

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