Australia’s Loot Box inquiry has handed down its report, with the majority not recommending any change to the current regulatory regime. The view for the moment at least – is there does not need to be any regulatory intervention to address loot boxes.
Last Tuesday, 27 November 2018, the Senate Environment and Communications References Committee (the Committee) handed down its Report on Gaming Micro-Transactions for Chance-Based Items.2 The Committee was tasked with investigating the extent to which gaming micro-transactions for chance-based items, more commonly known as 'loot boxes', may be harmful, with particular reference to:
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, including international comparisons, age requirements and disclosure of odds.
42 submissions were made to the Inquiry by stakeholders including statutory bodies, state legislators, representatives of the games sector, prominent individuals and academics, and held two public hearings to assist its inquiry.3
The Committee reviewed a number of submissions as to whether loot boxes fell within the legal and psychological definitions of gambling. Ultimately, given the breadth of game features that might constitute loot boxes, the Committee was unable to reach a definitive conclusion as to whether loot boxes constitute gambling. However, the Committee did acknowledge the broad consensus that where real-world currency is exchanged (that is, when loot boxes are purchased, where virtual items are bought and sold, or where both occur), those loot boxes most closely meet the definitions of gambling (both regulatory and psychological). In those circumstances, a range of risks to players may exist. These risks include the potential for loot boxes to cause gambling-related harm, (for example, unhealthy obsession and spending more money and/or time than is affordable). The Committee noted that particular demographic groups were especially vulnerable to the risks posed by loot boxes, including children, people with impulse control issues and people with mental health issues.
In recognition of these risks, the Committee considered a variety of potential regulatory reforms, including the imposition of a MA15+ or R18+ rating for video games containing loot boxes, a mandatory descriptor on all video games containing loot boxes, self-imposed and/or parental controls on interactions with loot boxes, compulsory disclosure of odds associated with loot boxes and an outright prohibition on loot boxes.
Recommendation – Another Inquiry?
Ultimately, the Committee chose to make a single recommendation, that is, that a comprehensive review be conducted of loot boxes in video games. The Committee recommended that the review be led by the Department of Communications and the Arts in conjunction with the Australian Communications and Media Authority, the Australian Competition and Consumer Commission, the Office of the e-Safety Commissioner, the Classification Board, and the Department of Social Services.
The purpose of the review would be to:
- conduct further research into the potential for gambling-related harms to be experienced as a result of interaction with loot boxes;
- identify any regulatory or policy gaps which may exist in Australia's regulatory frameworks;
- examine the adequacy of the Classification Scheme as it relates to video games containing loot boxes;
- consider if existing consumer protection frameworks adequately address issues unique to loot boxes; and
- ensure that Australia's approach to the issue is consistent with international counterparts.
The Australian Greens disagreed with the majority view and proposed a number of recommendations to modify the current regulatory regime, including:
- a review of the definition of 'gambling service' in the Interactive Gambling Act 2001 (Cth) to ensure that it continues to be fit for its purpose, particularly with regard to micro-transactions for chance-based items;
- a mandatory R18+ rating for games which contain loot boxes that meet the psychological definition of gambling and where virtual items can be monetised;
- a mandatory MA15+ rating for games which contain loot boxes that meet the psychological definition of gambling but where virtual items cannot be monetised;
- the inclusion of the words ‘Contains Simulated Gambling’ in the video game content rating label for games containing loot boxes; and
- the development of a consumer protection framework, in collaboration with the video game industry and community groups, that would include risk assessment processes to identify risks to children, reporting mechanisms for safety concerns, policies and processes for developers and publishers to respond to safety concerns, and information to assist consumers, parents and guardians.
Where To From Here?
The Federal Government is yet to comment on whether it will implement the sole recommendation of the Committee and conduct a review into loot boxes in video games. However, in light of the growing international discussion surrounding loot boxes and the fact that a number of governments have finalised their position, it is likely that the Government will request the Department to conduct a review in order to come to a conclusion on the legality of loot boxes. A review may be followed by any or all of the regulatory reforms considered by the Committee, depending on the review’s findings.
A review is now more likely given that the U.S. Federal Trade Commission (the FTC) will also review the issue. On 27 November 2018, the FTC announced that it would launch an investigation into loot boxes in video games, following a request made to the Entertainment and Software Ratings Board by Senator Maggie Hassan that the practice be looked into. The primary concerns raised were the use of psychological principles and enticing mechanics in loot boxes that closely resemble those found in casinos and games of chance.