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Federal Trade Commission Chairman Pledges to Investigate Video Game Loot Boxes

Federal Trade Commission chairman Joseph Simons on Tuesday said he would investigate video game loot boxes to ensure that children are being protected and parents are educated on the matter.

Simons testified Tuesday before the Senate Commerce Subcommittee on Consumer Protection, Product Safety, Insurance, and Data Security about the commission’s work. Following his testimony, a number of senators asked Simons questions on an array of topics.

Senator Maggie Hassan (D-NH), who brought up the issue of loot boxes in video games earlier this year, asked the FTC to launch the investigation and Simons confirmed he would.

The request comes about nine months after Hassan sent a letter to the Entertainment Software Ratings Board asking for the group to review the ratings process as it relates to loot boxes, examine the marketing of loot boxes to children, and put together best practices for developers around the toxic form of microtransactions. The senator also asked the board to conduct a study that further delves into the reach and impact of loot boxes in games. At the time, she said if they didn’t take sufficient action she would ask the FTC to get involved.

During Tuesday’s exchange, Hassan noted that she believes the problem of loot boxes, which are sold for real cash in some games and packed with in-game mystery items, continues to grow.

“Earlier this year, the confirmation hearing for most of you, I discussed the possibility of the FTC examining the issue of children in the video game space,” she said. “Specifically we discussed loot boxes, which allow end-game purchases with real currency for surprise winnings, and most of you agreed this is an area that could use additional oversight by the FTC.

“Loot boxes are now endemic in the video game industry and are present in everything from casual smartphone games to the newest, high-budget video game releases. Loot boxes will represent a $50 billion industry by the year 2022, according to the latest research estimates. Children may be particularly susceptible to engaging with these in-game purchases, which are often considered integral components of video games. Just this month Great Britain’s gambling commission released a report finding that 30% of children have used loot boxes in video games. The report further found that this exposure may correlate with a rise of young problem gamblers in the United Kingdom. Belgium, Netherlands, and Japan have moved to regulate the use of loot boxes in video games given this close link to gambling.

“Given the seriousness of this issue, I think it is in fact time for the FTC to investigate these mechanisms to ensure that children are being adequately protected and to educate parents about potential addiction or other negative impacts of these games. Would you commit to undertaking this project and keeping this committee informed about it?”

Simons replied with a simple, “Yes.”

Earlier this year, the ESRB said it would continue to make enhancements to ensure parents continue to be well-informed as the industry evolves. The group did not directly address what it might do in terms of loot boxes, microtransactions, and ratings.

Despite news of the investigation, the Entertainment Software Association continued to defend the use of loot boxes.

“Loot boxes are one way that players can enhance the experience that video games offer,” the association said to Variety. “Contrary to assertions, loot boxes are not gambling. They have no real-world value, players always receive something that enhances their experience, and they are entirely optional to purchase. They can enhance the experience for those who choose to use them, but have no impact on those who do not.”

Reached for comment Tuesday evening, Hassan told Variety that the issue requires FTC intervention.

“While I have appreciated working with the ESRB on this issue, I have also said that the Federal Trade Commission has a responsibility to look at this issue,” she said. “The need for FTC action becomes more apparent given the recent report from the Gambling Commission of Great Britain and the steps other countries have taken to regulate loot boxes. I hope the FTC will move quickly to begin their investigation and look forward to working with all parties on this issue.”

 

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