Level Up: A guide to the video games industry - Level Ten: In-Game Purchases

Level Up: A guide to the video games industry: In-Game Purchases

Video games have been a popular form of entertainment since their creation and have played a key role in shaping pop culture across the world. In recent years, video games have dominated entertainment retail sales, with the global video games market estimated to be worth in excess of US$174 billion in 2020 and predicted to exceed US$300 billion by 2025.

With this in mind, we wanted to create an all-in-one legal guide for those that currently operate in or are considering entering the video games industry with the purpose of providing an overview of the life cycle of a video game – from the early stages of development, past the grind of regulatory compliance, through to the final stages of monetising the product.

To access the full guide, please email talkingtech@cliffordchance.com

Level 10: In Game Purchases

In game purchases are in the minds of regulators and likely to be a regulatory issue in 2023. Only recently, the European Parliament's Internal Market and Consumer Protection Committee called for a set of EU-wide rules to provide for better consumer protections, particularly in respect of loot boxes and children, but also on game content and in-game purchase policies.

Key considerations for in-game purchases:

Adverts should not mislead consumers by omitting or obscuring material information, including by presenting it in an unclear, unintelligible, ambiguous or untimely manner. This can be ameliorated through the inclusion of a notice if an advert contains non-gameplay footage (e.g., “Not actual gameplay footage”).
If the video game contains “in-game” or “random-item” purchasing, any advertising for the game should make this point clear with accessible and clearly visible notices.
Where consumers can buy “premium currency” (i.e. in-game digital currency) to use for in-game purchase, the cost of this currency must be clear, particularly when currency is “bundled” with other digital assets.
Comparisons made between different bundles should be clear and not likely to mislead (e.g., careful consideration should be given to any savings claims or wording such as “best value” and “cheapest”).
Where in-game purchases must be paid for with premium currency, it must be clear what the equivalent “real-world” price is for the item. For example, state the real world price next to the premium currency price or include a prominent exchange rate or example list of pricing.
Consider the nature and presentation of in-game purchases and how this might impact the vulnerable (e.g., children; gambling addicts; cognitively impaired). This may be a particular concern where messaging is within gameplay and time-pressured. Such marketing techniques could be seen to amount to placing undue pressure on vulnerable players to purchase items and may be seen to fall foul of certain gambling regulations too.
Random-item purchasing (e.g., Loot Boxes) can contain an element of chance and luck, requiring players to provide immediate responses in a similar manner to certain gambling activities. Accordingly, certain marketing techniques will likely fall foul of the Code’s social responsibility requirements and the relevant gambling regulations (e.g., explicit or implicit links to real-world gambling; encouragements to ‘try one more time’; suggestions the player almost won a ‘rare item’ despite being a game of chance).

Loot Boxes

Loot boxes are a feature in video games which may be unlocked by gameplay or purchased. They contain randomised virtual items that can be used in gameplay, such as items of clothing, skins, new characters, weapons or power-ups to improve the playing experience.

Since loot boxes are randomised, players do not have any certainty as to the specific item or content they may receive from each transaction. Their unique element is the chance mechanism, and in many ways they function as a lottery in that a player may receive a valuable item for a low cost but may also receive numerous low-value items at a high cost. Probability rates for successfully receiving certain items from loot boxes will vary between video games.

Loot boxes are an additional source of revenue for publishers, however, their use in video games has recently come under scrutiny by regulators, governments and the wider-gaming community worldwide.

In particular, analogies have been drawn between loot box microtransactions and gambling. This has led to the UK Gambling Commission reviewing the use of loot boxes in video games. It reported that while there were significant concerns about children playing video games that offered loot box microtransactions, loot boxes themselves do not qualify as a form of gambling under current UK law. This is because, in order for an activity to qualify as “gambling”, the prizes offered must either be money or have monetary value.

At present, digital items that may be won from loot boxes and only used within that particular video game currently fall outside the scope of the definition of ‘gambling’ and UK gambling laws.

Other countries, too, are looking at the issue. See our article : The ultimate loot drop: the Netherlands is planning to ban loot boxes in video games.

Case Study: FIFA25

In response to recent scrutiny of loot box games, and their affinities with addiction and gambling, Electronic Arts (EA), the well-known games publisher, recently launched. “FIFA Playtime”, with a new feature that allows players of FIFA 21, a popular football game, to view how much time and money they have spent on the game and allows players to set limits for both. EA built the tool to enable players to have greater transparency and control over their gameplay experience.

Further to the above, the UK Government has recently called for evidence from the video games industry and gaming community in order to understand the potential harm that may be caused by loot boxes with the possibility of amending UK gambling laws (e.g., Gambling Act 2005) in order to protect vulnerable players.26

As at the date of writing, the consultation is still underway but we recommend that video game developers and publishers watch this space for future developments. In particular, developers and publishers should review their current and future use of loot boxes and assess the risks of any potential unlawful activity and/or reputational damage.

Following a recent enquiry, a committee for the Department of Digital, Culture, Media and Sport recommended that paid loot boxes should adhere to the regulations of gambling laws, and called for a ban on selling games with loot boxes to children.

In response, certain publishers have introduced the concepts of “Battle Passes” (e.g., Call of Duty: Warzone), “Season Passes” (e.g., Fortnite) and other recurring monetisation schemes that are based on streaming models but still have an element of chance.

It is not clear if the relevant regulatory authorities will consider such strategies to be far enough removed from gambling; however, we recommend that key stakeholders watch this space for further guidance from the regulators, which will no doubt follow in due course.