An Empirical Comparison of Video Game Companies’ Compliance with Industry Self-Regulation of Gambling-Like Loot Boxes in the US and EU/UK

Investigator:
Leon Y. Xiao

Abstract:
Loot boxes are products in video games that players buy with real-world money to obtain random rewards. Loot boxes are conceptually and psychologically similar to gambling. Concerns have been raised about vulnerable consumers, such as children and people experiencing gambling harms, overspending money and thereby experiencing harm. The regulation of gambling-like products within video games is a novel information technology law issue. On both sides of the Atlantic, loot boxes have proven very difficult to regulate, despite significant interest in doing so. In the US, multiple Bills at both state and federal levels have failed to pass. In Europe (both EU and the UK), some countries have taken more substantial regulatory action, but these have either been overturned by the court (in the Netherlands) or empirically proven to be ineffective (in Belgium). The consumer protection issues relating to loot boxes have therefore not been adequately addressed by legal means.

Recognizing public concern, particularly from parents of child players, the video game industry has adopted two major industry self-regulatory measures: (i) requirements by the game age rating agencies (ESRB & PEGI) to disclose loot box presence with a label (presence warnings) and (ii) mandatory disclosure of the probabilities of obtaining random rewards (probability disclosures). This project seeks to empirically assess compliance with both measures. Has the ESRB and PEGI applied the presence warnings consistently to games? Have probability disclosures been made for the highest-grossing US Android games, and if so, have they been made prominently and accessibly? Answering these questions will shed light on whether companies have lived up to their promise of being responsible with the implementation of a potentially harmful video game technology. How might these two consumer protection measures practically be implemented better and more responsibly?

More broadly, this project hopes to contribute to our understanding of whether information technology regulation could perhaps be (partially) accomplished through industry self-regulation rather than legal state regulation.