A senate inquiry has been launched into “loot boxes” in video games, with the potential for the controversial mechanisms to be regulated or completely banned.
The motion to refer the question of how harmful these loot boxes are and if they constitute gambling and whether adequate consumer protections are in place was unanimously supported by the senate, with the Environment and Communications References Committee launching an investigation.
The committee is now taking public submissions and will report back to government by 17 September this year.
Loot boxes are video game mechanisms that generate randomised rewards in exchange for real money. In some cases, the rewards can be traded outside of the game for real money. Debate has raged recently over whether these loot boxes constitute gambling and whether they are appropriate for younger audiences.
Greens Senator Jordon Steele-John moved a motion in the Senate last week for the government to investigate the use of loot boxes in video games, whether they constitute gambling and whether they are appropriate for younger audiences.
The motion was supported by the government and opposition, and the matter was referred to the senate committee the next day for an inquiry.
The terms of reference for the inquiry have now been released.
The committee will be investigating whether loot boxes are harmful and constitute gambling, the “adequacy of the current consumer protections and regulatory framework” and international comparisons.
New regulations and protections may need to be enforced to protect young and vulnerable users, Senator Steele-John said.
“I have significant concerns about the adequacy of current consumer protection and regulatory frameworks for monetised game mechanics, particularly when we know they are accessible to children,” Senator Steele-John said.
“An incredible number of popular big name titles incorporate these kinds of monetised game mechanics, not as a way of improving in-game experience, but as a way of simply prying more money off of their players.
“We know game developers hate them, we know players hate them because they have a negative impact on the game experience, and we know that they urgently need regulation. The impact of gambling on people’s lives is such that we cannot afford to stay silent on this issue and it is fantastic both the government and opposition are supporting the Greens on this issue.”
The inquiry has the backing of the government, with Liberal senator James McGrath saying that Communications Minister Mitch Fifield has recently discussed the issue with colleagues.
Labor senator Anthony Chisholm also spoke in support of the investigation.
“Labor acknowledges there is some community debate and concern that the ‘loot box’ feature can normalise spending behaviour in a gaming context and potentially act as a precursor to problem gambling behaviour,” Senator Chisholm said.
“Labor acknowledges that this is an area that may benefit from clarification around potential harms, regulatory definitions and responsibilities in the current consumer protection and regulatory framework.”
A number of European jurisdictions have recently moved to crack down on these loot boxes, with Dutch and Belgium authorities moving to outlaw them completely. The French online gambling regulator has also called for a “concerted course of action” from European entities to look into the mechanism and if it should be banned.
In the US, several states are also looking to ban the gaming feature.
The inquiry will focus on whether or not these loot boxes constitute gambling. If they are, there would then need to be harsher restrictions and regulations around who can access the games that include them.
A paper published last week found that the loot boxes are “psychologically akin to gambling”, meeting the psychological and legal definitions of gambling. Another study by psychology researchers at the University of Adelaide also found that the mechanisms have a resemblance to gambling, and employ “predatory” techniques.
“These schemes may entice some players to spend more money than they have intended or can afford, especially when using credit cards or virtual currency that makes it hard to keep track of spending,” senior research associate at the University of Adelaide’s School of Psychology Daniel King said.
“There are few regulations or consumer protections associated with these systems and I think most experienced gamers will agree: gaming should really be about skillful play, not gambling.”
But Australian industry association the Interactive Games and Entertainment Association (IGEA) has argued that loot boxes are not gambling because players always receive something in exchange for their money.
“In obtaining loot boxes, players always receive an in-game feature that allows them to customise their playing experience. This function is wholly different from gambling where players spend money and often receive nothing in return,” IGEA CEO Ron Curry told InnovationAus.com.
Mr Curry instead said that loot boxes are more in line with football trading cards or Kinder Surprises.
“As a consumer you purchase these items and sometimes within the pack of cards or the chocolate you receive the exact item you hoped for. Other times you don’t, however you always end up with an item. When it comes to gambling, you actually don’t always receive something of value in return, like a lottery ticket,” he said.
“It is IGEA’s hope that the government becomes more educated about this particular evolving business model, which incidentally is not new and does not conflate loot boxes with microtransactions more broadly. The industry is best placed to deal with these topics quickly when they arise as the relationship between consumers and publishers or developers is critical to the success of any game.”
But a number of authorities from around the world have ruled that the loot box mechanism does constitute gambling.
According to Kotaku, a representative from the Victorian Commissioner for Gambling and Liquor Regulation has said that they believe loot boxes do in fact constitute gambling but a crackdown would be made difficult by international jurisdictions.
“What occurs with ‘loot boxes’ does constitute gambling by the definition of the Victorian legislation. Unfortunately where the complexity arises is in jurisdiction and our powers to investigate. Legislation has not moved as quickly as the technology, at both state and federal level we are not necessarily equipped to determine the legality of these practices in lieu of the fact the entities responsible are overseas,” the representative said.