The use of in-game purchases has become increasingly popular. This monetisation model involves the sale of game play extras to users in order to add an additional revenue stream. For example, the hugely popular battle royale game, Fortnite, was one of the highest grossing video games of 2018 despite being free to play.
The rise of in-game purchases
Fortnite enables users to purchase various in-game cosmetic items such as costumes and emotes with in-game currency which can be bought for real money. According to a recent survey, nearly 70% of players spent money on in-game purchases. Perhaps most concerning was the finding that around one in five of those who spent money did so without realising that the purchased items would not give them any competitive advantage. Loot boxes can fall into this category.
While Fortnite does appeal to adults, it welcomes players aged 12 and above and there has been a marked increase in the number of games that use in-game purchases which are targeted at children (another recent survey found that 40% of parents whose children played video games allowed their children to spend money within them). The sale of in-game purchases which target children may breach the Consumer Protection (from Unfair Trading) Regulations 2008.
Public awareness of the issue has also been raised by several high-profile news reports of children who had spent a fortune on in-game purchases – like the British child who spent £700 in 72 hours playing Fortnite – causing regulators to sharpen their teeth.
In the UK, the Office of Fair Trading (OFT) (now the Competition and Markets Authority) responded to the increase in public concern around in-game purchases and announced an investigation into the ways in which online and app games encourage children to make purchases in 2013.
The OFT looked particularly at whether these games include unlawful "...direct exhortations to children – a strong encouragement to make a purchase, or to do something that will necessitate making a purchase, or to persuade their parents or other adults to make a purchase for them."
This is unlawful under the UK’s Consumer Protection from Unfair Trading Regulations 2008. On completion of its investigation, the OFT published guidelines setting out examples of behaviours more or less likely to comply with consumer protection laws.
The Advertising Standards Authority
In relation to how games are advertised/marketed, in the UK, it is the Advertising Standards Authority (ASA) which has the power to examine the adverts for games and consider whether or not they could mislead the public.
The ASA has stated that adverts for games should make clear what consumers can expect from the free elements and whether in-game purchases will have a significant impact on gameplay. Complaints related to various app-based games for children have been referred to the ASA for having been advertised as "free" but incurring costs when the child has been able to freely make in-app purchases.
Physical video games warnings
In August 2018, Pan European Game Information (PEGI) announced that, in addition to the requirement for digitalonly games, it would start to include a new "In-Game Purchases" content descriptor icon on rating licenses for physical releases of video games, informing parents prior to purchase about the possibility of spending money within the game.
The icon features a hand holding a credit card and will appear alongside existing graphics indicating a suggested age limit for players and providing a warning if games include content which features eg sex, drugs, bad language and gambling.
Some game publishers have explored other, less contentious in-app monetisation models. One approach is the 'toys-to-life' concept, where physical toys are recognised by games consoles via Near Field Communication chips and then replicated as a character within the game (Activision’s Skylanders franchise is a leading example, and Ubisoft entered this market in 2018 with Starlink: Battle for Atlas). This is a relatively new approach in an area where the law lags behind the technology.
Google and Apple subsequently made changes to their app stores as a result of these referrals, in particular to strengthen payment authorisation settings and to ask games developers to stop describing games as "free" when they contain in-game purchases.