The UK government has published a formal response to the Department for Digital, Culture, Media and Sport (DCMS) Select Committee’s report on Immersive and Addictive Technologies. The government’s response is likely to be broadly welcomed by the video games industry as the government has proposed to take a cautious, industry-led approach to the Committee’s key recommendations, including the potential regulation of loot boxes under gambling legislation.

Loot boxes

Loot boxes (or “gacha” mechanisms as they are known in Japan where many of the games featuring this type of functionality originate), are an in-game mechanic whereby players receive a randomised selection of virtual items or “loot” in return for real or virtual (in-game) currency. Loot boxes are an increasingly common feature in many games and can be lucrative for gaming companies due to their ability to generate revenue after the initial purchase or release of a game.

The DCMS Select Committee, whose report was published in September 2019 following a lengthy and detailed inquiry, recommended that loot boxes should not be sold to children playing games and should be regulated as a ‘game of chance’ under the Gambling Act 2005 (the “Act”). If loot boxes were to be brought within the scope of the Act by future regulation, operators would need to obtain licences from the Gambling Commission and then face an ongoing compliance burden with risk of fines for breach.

The government has responded to this recommendation by announcing a further call for evidence on loot boxes which will take place later in 2020 (no specific date is given). The government also confirmed that any legislative change will take place as part of its wider review of the Act (which was announced in the December 2019 Queen’s Speech). It is therefore unlikely that any legislative changes will be enacted until 2021.

In its response, the government commends a number of recent self-regulating steps taken by the video games industry and relies on these examples as evidence that some of the Committee’s concerns are (at least in part) being addressed on a voluntary basis by industry players. Examples of those steps include:

  • the joint announcement by Sony Interactive Entertainment, Microsoft and Nintendo that all future titles across their PlayStation, Xbox and Switch consoles will be required to disclose the relative probability of receiving the randomised virtual items in loot boxes (a similar initiative has been endorsed by the Association for UK Interactive Entertainment (UKIE)); and
  • moves by Pan-European Game Information (PEGI) to increase the age rating on simulated gambling games and to inform consumers when games contain ‘paid random items’.

Responses to the Committee’s other recommendations

Online age ratings: The government confirmed that it will soon assess the level of voluntary compliance by the video games industry in implementing PEGI age ratings for online games. If it considers that insufficient progress has been made, it will take legislative action.

Future online harms regulator: Following a consultation response published in February 2020 (see our updates here and here), the government will publish a full response and policy details in relation to the regulation of online harms later this year. New rules are likely to require companies to use a range of proportionate tools to verify age and prevent children from accessing age-inappropriate content online. Ofcom is likely to be given regulatory responsibility, although timelines remain unclear.

 

Hayley Brady
Hayley Brady
Consultant, Head of Digital and Media, London
+44 20 7466 2079

James Balfour
James Balfour
Associate, London
+44 20 7466 7582

Milan Baxter
Milan Baxter
Associate, London
+44 20 7466 6441