FTC Announces Loot Box Consumer Protection Workshop

The Federal Trade Commission recently announced that it plans to hold a public workshop in August 2019 that will examine consumer protection issues related to video game “loot boxes.”

What are Loot Boxes

Loot boxes are in-game rewards players can purchase while playing a video game. They contain a random assortment of virtual items to assist a player in advancing in the online game or to customize his or her game avatar.

Players purchase loot boxes using virtual currency that they may earn within the game or purchase with real money.

Protection of Minors

Loot boxes have produced a growing revenue stream for game developers. At the same time, concerns have been raised about techniques used to market loot boxes and whether minors are becoming addicted to these in-game purchases.

The workshop, “Inside the Game: Unlocking the Consumer Issues Surrounding Loot Boxes,” will bring together industry representatives, consumer advocates, trade associations, academics and government officials to discuss concerns regarding the marketing and use of loot boxes and other in-game purchases, and the potential behavioral impact of these virtual rewards on young consumers.

FTC Investigation

In 2018, the FTC initiated an investigation into loot boxes at the request of New Hampshire Senator Maggie Hassan. Sen. Hassan called attention to a report from the UK Gambling Commission which she believes found a correlation between loot boxes and an increase in gambling activities of minors.

U.S. regulators are now enhancing focus on the topic of whether loot boxes are illegal gambling.

What Topics Will the Workshop Cover?

Topics this workshop will cover include:

  • The in-game transaction landscape, including the origins and evolution of loot boxes and their role in game play and the digital marketplace;
  • Research examining consumer behavior, including child and adolescent behavior, in the context of video games and digital transactions; and
  • A discussion of consumer awareness and education about in-game digital transactions, including the mechanics, marketing, and financial commitments associated with loot boxes.

FTC attorneys are seeking public input in advance of the workshop, including possible discussion topics and potential participants.

Are Loot Boxes Gambling?

Many believe that the purchase of loot boxes are a form of gambling and should not be accessible to children. In fact, multiple international gaming commissions have ruled that loot boxes are illegal games of chance. Washington State has also recently gone on record about the “risks being posed by the blurring of lines between gambling and other forms of digital entertainment such as video gaming.”

Game developers take the position that loot boxes are not gambling because their contents have no real value and are simply used to enhance a player’s video game experience.

If you are interested in learning more about this topic, or if you have received a civil investigative demand (CID) from the FTC, contact the author at rnewman@hinchnewman.com.or follow FTC defense lawyer on National Law Review.

Richard B. Newman is an Internet marketing attorney at Hinch Newman LLP.

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Richard B. Newman

Richard B. Newman is a nationally recognized FTC advertising compliance, CID investigation and regulatory enforcemetn attorney. He regularly provides advertising counsel and represents clients in high-profile investigations and enforcement proceedings initiated by the Federal Trade Commission, state attorneys general, departments of consumer affairs, and other federal and state agencies with jurisdiction over advertising and marketing practices. Richard is also an ecommerce lawyer and spam defense attorney. His practice additionally focuses upon false advertising defense, data privacy, cybersquatting, intellectual property law and transactional matters relating to the dissemination of national advertising campaigns, including the gamut of affiliate marketing, telemarketing, lead generation, list management and licensing agreements. Richard advises clients on how to minimize the legal risks associated with digital marketing, email marketing, telemarketing, social media influencer campaigns, endorsements and testimonials, negative option marketing models, native advertising, online promotions and comparative advertising,

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