In April this year, the Belgian Gaming Commission (“BGC”) announced the outcome of its investigation on loot boxes against three major companies from the gaming sector. The BGC found the investigated loot box mechanisms to be in violation with existing Belgian gambling laws by applying a very broad gambling definition (summary and comments here). The BGC also stated that “[g]iven the fact that only four games were examined, the problem might be bigger” and recommended a general “ban on minors purchasing games with paid loot boxes”, implying that other games including loot boxes might become subject to investigation as well.
As a result of the BGC’s investigation, two of the three investigated companies stopped distributing loot boxes in the investigated games. However, it is now being reported that the third investigated company might face criminal prosecution as it has not reacted to the demands of the BGC so far. But what does criminal prosecution mean? And what other risks and options exist? The following short article provides a high-level overview on potential sanctions and options companies might face/have in case they would also become subject to a loot box investigation in Belgium. The article is based on local counsel input from various loot box projects we carried out in the past, including legal advice on the recent investigations in Belgium and the Netherlands.
What are the sanctions companies will have to face?
Possible sanctions are either a criminal or administrative fine ranging from € 800 to € 800,000. In case of repeated offenses or if the act was committed against a minor the maximum fine is € 1,600,000. In addition to or instead of such fines, the Court can also order imprisonment from 6 months to 5 years. Criminal or administrative fines can also be imposed on legal entities and will in that case range from € 3,000 to 1,600,000 (€ 3,200,000 in case it was the second offense or if the victim is a minor). The determination of the fine is up to the discretion of the criminal court and/or the BGC; when minors are involved, it can be expected that fines will be more in the higher end of the range. Lastly, the BGC can also order that the distribution of the allegedly illegal game must be stopped.
Who can be prosecuted?
Only the distribution of a video game which includes gambling elements is a criminal offense (provided no gambling license has been obtained). It is not an offence to develop/design such a game. Thus, only employees involved in the distribution can be prosecuted. Additionally, criminal prosecution of the legal entity responsible for the distribution of the game is possible. However, where the criminal offense has been committed by an individual and a legal entity, only the person who/which committed the more serious offense may be prosecuted. This is typically the legal entity, unless the individual would have acted with a particular criminal intent.
Must the distribution of loot boxes be stopped even if the BGC’s decision would be challenged in court?
This depends on the measures taken by the BGC. In case the BGC imposes an administrative fine, the decision can be appealed before a Belgian first level court. Such an appeal would have suspensive effect. In case the BGC issues an order to stop the distribution of the game, the order could be challenged by filing a plea for suspension and annulment before the Council of State. Such a plea has no suspensive character but can be decided by the Council within a few weeks if this would be justified by reasons of urgency. Finally, criminal law sanctions are not enforceable for the duration of the appeal.
Can companies challenge the BGC decision before an official order has been issued?
When becoming subject to an investigation by the BGC, the most significant risk companies and their representatives are facing are criminal prosecution and sanctions. While administrative fines for individuals are equally high, criminal prosecution is typically considered as much worse as it – in the worst case – means imprisonment and being convicted for a crime. This brings up the question, whether companies can proactively challenge the BGC’s position in an administrative or other non-criminal law court before the BGC has decided which route of sanctions it will take and issues a corresponding decision. Subject to a detailed analysis of the exact procedural and factual situation, two possible options exist in this regard. However, both are rather uncommon. The first option is subject to an increased procedural risk that the action might be dismissed as inadmissible without the court deciding over the question whether the incriminated loot box mechanism indeed falls under Belgian gambling laws. The second option has a better procedural perspective but might require applying for a gambling license simply for strategic reasons and for building up a better argument/case.