On March 23, 2018 the German Commission for the Protection of Youth in the Media (“KJM”) released its long awaited official position on loot boxes. The KJM is the head regulator for youth protection in online media in Germany (including video games, apps, social casino, etc.). The KJM’s statement is non-committal. However, the KJM outlines that loot boxes can under certain circumstances violate youth protection laws. The KJM is not responsible for regulating gambling. Thus, potential issues from a gambling law perspective are not addressed.
Developments on loot boxes in Germany so far
The still ongoing 2017/2018 global loot box controversy caused several reactions by German regulators, politicians and other stakeholders. In October 2017 both, the German Age Rating Board (USK) and the Federal Review Board for Media Harmful to Minors (BPjM), released an official statement on the matter. The USK statement about loot boxes not constituting gambling found widespread global attention. In November 2017 loot boxes were discussed in the Bavarian Parliament and three emergency appeals were lodged to the Bavarian government to investigate the matter. Two of them passed the parliament. One suggested that the Bavarian government should engage the KJM with the matter of loot boxes. Following the emergency appeals, the Bavarian State Ministry for Labor and Social Matters, Family and Integration (“the Ministry”) asked the KJM to look into the matter of youth protection in online-games in light of the new phenomenon of loot boxes. During its ongoing investigation, on February 2, 2018, the KJM chairman gave an interview to a major German newspaper, stating that loot boxes might violate the prohibition on direct appeals to buy products directed towards minors. The interview caused massive global attention and was often falsely reported as “Germany is about to ban loot boxes”. However, the KJM’s final decision on loot boxes was about to be released in March.
The KJM’s statement
In response to the Ministry’s request, the KJM published its official statement on Friday 23, 2018. The five pages long statement outlines that loot boxes can under certain circumstances violate the prohibition of direct advertisement appeals to buy products directed towards minors (Sec. 6 (2) No. 1 JMStV) and the prohibition that advertisement directed towards minors may not harm the interests of minors or exploit their inexperience (Sec. 6 (4) JMStV). Whether this would be the case is subject to a case-by-case decision and the exact setup of the loot box offer. However, the KJM also held that none of the games which were reported to it by the Ministry posed an issue, in particular because some of them were rated 16+ and therefore not explicitly directed at children. Other than that, the KJM did not go into much detail. It concludes with stating that although some of the investigated kids directed gaming apps included loot boxes, none of them advertised the loot boxes with unlawful direct appeals. Furthermore, the KJM makes clear that until now no specific complaints about a potentially unlawful loot box presentation have reached it.
The KJM’s statement is rather non-committal. The fact that the KJM points out that no complaints on specific loot box mechanisms have reached it so far, indicates that it does not intent to investigate the matter by itself any further without any external complaints. However, due to the ongoing heated loot box debate such complaints are not unlikely (in particular after the KJM has released its statement). This gives rise to the question under which circumstances the KJM could prohibit a specific loot box mechanism. Additionally, similar provisions as those which are subject to the KJM decision can be found in the German Law Against Unfair Competition (“UWG”). Thus, potential violations can also be made subject to cease and desist claims by competitors and in particular consumer protection associations. A detailed legal analysis in light of the KJM statement can be found under the link below.
Aside from youth protection laws, loot boxes touch in particular gambling laws, consumer laws and sometimes even financial laws (in case virtual currency is used for the purchase). Other jurisdictions with recent regulatory, political and legal developments in relation to loot boxes include the USA, UK, Belgium, China, Japan, the Netherlands, France, South Korea, New Zealand, Australia, Singapore, Isle of Man, Sweden, Norway and Denmark.