Ray Marshall

Australian Senate opens inquiry on “loot boxes”

Ray Marshall

12 July 2018

IT Legislation Updates

If you’re interested in computer games, or know someone that is, you’ve probably heard of loot boxes, an increasingly common feature of computer games which has also been drawing increasing criticism and regulatory attention of late.

What are loot boxes?

Loot boxes are digital items which may be purchased in computer and mobile games. Each loot box can contain one or more of a range of randomly selected digital items that can have a practical effect within the game’s environment (e.g. a different character the player can play, or an improved weapon in a fighting game) or merely cosmetic (e.g. additional clothing or make-up for a character). After purchasing the loot box, the player can “unpack” the loot box and obtain these items.

Loot boxes have been around (and criticised) in some fashion since the first “freemium” mobile phone games were released in about 2007. However, greater attention has come to loot boxes since 2016 with the launch of games such as Overwatch, PlayerUnknown’s Battlegrounds, and Star Wars Battlefront II, each of which implemented a form of loot boxes as a key part of play.

Why are people talking about loot boxes?

Loot boxes have received heavy criticism by gamers and the gaming press. The player usually has no idea of, and no way to control, what items they may receive from the loot box. This means that a player may spend a considerable amount of money on loot boxes for items that could considerably enhance their gaming experience, or add nothing to it.

With some players spending thousands of dollars or more on loot boxes to obtain rare and exclusive items, and the randomness of players receiving anything of value in return, critics have drawn comparisons between loot boxes and other forms of addictive gambling.

Discussions so far

The similarities between loot boxes and gambling have drawn the attention of many regulators around the world, with some countries implementing new regulations on the permissibility of loot boxes:

  • China has banned game publishers from selling loot boxes and other types of “lottery ticket”. Publishers must also disclose to players the probability that any given item will be awarded in a loot box.
  • South Korea has considered similar legislation requiring publishers to disclose probability information.
  • The United Kingdom currently considers that if the digital items are not redeemable for cash, gambling has not occurred. However, whether further changes to the law should be made in respect of loot boxes has been a recurring topic in parliament. Interestingly, the Isle of Man has introduced regulations recognising that loot boxes and other digital items have value in and of themselves, bringing loot boxes under their gaming regulations.
  • Authorities in both Belgium and the Netherlands have investigated various games and found that the implementation of loot boxes in at least some of these games constituted illegal gambling. Parties in both countries are pushing for an EU-wide approach to loot boxes.
  • Further investigations are underway throughout Europe, Asia, and the USA.

In Australia, the Victorian Commission for Gambling and Liquor Regulation has previously stated that it considers loot boxes to be gambling. However, the Commission’s powers only extend to Victorian operators. The eSafety Commissioner has also published guidance comparing loot boxes with other gambling themed games.

Senate inquiry

On 28 June 2018, the Australian Senate referred the question of loot boxes to the Environment and Communications References Committee for investigation.

The Committee will be considering:

  • whether the purchase of chance-based items, combined with the ability to monetise these items on third-party platforms, constitutes a form of gambling; and
  • the adequacy of the current consumer protection and regulatory framework for in-game micro transactions for chance-based items.

Submission from the public are open until 27 July 2018. The Committee is to give its report by 17 September 2018.

Further information is available from the Parliament of Australia website.