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Regulators and government authorities worldwide face a difficult challenge enforcing advertising rules for loot boxes, as a leading campaigner says he is frustrated about patchy enforcement against misleading ads for these pseudo-gambling products.
In the UK, the Advertising Standards Authority (ASA) has set out rules about how advertisers can market games including loot boxes.
The ASA has also taken action to remove non-compliant loot box adverts, most recently banning three separate social media ads for games that failed to disclose that they included loot boxes after they were flagged by an academic.
US-based video game giant Electronic Arts (EA) and UK-based RuneScape developer Jagex, which were found to be in breach by the ASA, are ironically members of the technical working group for lootbox industry self-regulation assembled by the UK Department for Digital, Culture, Media & Sport.
Leon Xiao, PhD fellow from the Center for Digital Play at the IT University of Copenhagen, has been flagging these non-compliant adverts to the ASA and regulators in other jurisdictions around the world for many months.
However, following action taken by the ASA, one of the companies soon released another advert flagged by Xiao again failing to disclose the game it was promoting included loot boxes.
Another one of the adverts also reappeared including a required disclosure; however, the disclosure was written in small text, as opposed to being the same font size as the rest of the advertising text as required.
This prompted Xiao to say he could not be bothered to flag every non-compliant advert to the ASA "as that would be hundreds", instead he now focuses his complaints on "potentially precedent-setting cases".
Xiao also said on social media that most of his complaints have been from UK-based companies. and "it would be significantly more difficult to get the non-UK-based companies to comply. What real enforcement mechanism is there?”
A spokesperson for the ASA said: “We’re alive to this issue and we’re continuing to review the situation to ensure our guidance is effective. We won’t hesitate to ban ads that break our rules.”
Loot boxes are a legal product in the UK; however, “there can be issues with how they’re advertised to potentially vulnerable consumers, including under-18s”, according to the ASA.
In the UK, the Gambling Commission is not responsible for the regulation of products that fall outside the definitions of gambling within the Gambling Act 2005.
“For all loot boxes to be classed as gambling there would need to be a change to primary legislation. In its response to a call for evidence response in July 2022 the government confirmed it does not intend to amend or extend the scope of gambling regulation to cover loot boxes at this time,” a Gambling Commission spokesperson told Vixio.
In 2021, following a consultation, the ASA published guidance that “made it clear that ads for in-game purchases, including loot boxes, and ads for games that feature them, must not mislead consumers”.
The guidance also includes a requirement for any adverts for games that feature in-game purchases, including loot boxes, to state that clearly.
“It also needs to be easy for consumers to understand how much they’re spending on in-game transactions, and ads need to be clear about what content primarily relies on making extra purchases. We encourage anyone with concerns about ads they’ve seen to get in touch,” the ASA said.
Xiao praised the ASA for being the first regulator he knows of to try and address the problem, adding that it is “nice to see that the ASA will enforce the rules as they have set out in that document”.
However, the academic argues more serious action may be required.
Companies that repeatedly break ASA rules can be referred to Trading Standards.
“It is a crime to mislead by omission. Trading Standards should consider bringing criminal prosecution against UK companies that continue to fail to disclose loot box presence in video game advertising,” Xiao said.
The academic also believes that regulators should be working closely with social media platforms, as they could play a key role in stopping non-compliant adverts from being published on their websites.
“It should be part of the normal procedure to check video game ads for compliance as to whether they disclosed the presence of in-game purchases and loot boxes if either is relevant. This is likely to be an effective strategy in dealing with non-UK-based companies that neither the ASA nor Trading Standards can effectively enforce against,” Xiao said.
Difficulty enforcing non-compliant loot box adverts is not unique to the UK, but regulators around the world are beginning to take action.
In Belgium, in theory, because of a ban on loot boxes over their links to gambling, any advertising of loot boxes should also be prohibited.
However, “given that the ban on loot boxes itself has not been enforced, I doubt the prohibition on advertising an illegal product has been enforced”, Xiao said.
In South Korea, since March 22, 2024, companies are now required to disclose loot box presence in their advertising using very specific words.
“However, compliance has not yet been assessed because the rule just recently came into force. I would expect non-Korean companies will struggle to know what their obligations are and comply,” Xiao said.
