EU Digital Fairness Act would tighten rules on loot boxes and gambling influencer marketing

The European Commission has proposed new consumer-protection rules for digital products and marketing. This included restrictions on paid loot boxes and other random-reward features, limits on pay-to-win mechanics for minors and tighter requirements for influencers promoting products such as gambling services.

The draft Regulation, published on Thursday, is intended to replace the 2005 Unfair Commercial Practices Directive with directly applicable rules across the EU, while adding specific provisions for digital commercial practices. 

Paid random rewards and loot boxes

Article 15 would regulate paid “variable reward systems”, defined in the draft as virtual items offering random rewards or variable odds that are acquired through payment or paid-for virtual currency. 

Examples given in Recital 63, which justified Article 15, included loot boxes, wheels of fortune and collectible card packs.

“Variable reward systems that offer random rewards or variable odds, such as loot boxes, wheels of fortune, or collectible card packs, are prone not only to cause unwanted spending by consumers but can also be harmful due to the fact that they share the speculative features of gambling”, explained the Recital.

However, the video games industry does not generally accept that comparison. 

Felix Hilgert, partner at Osborne Clarke and video games and technology lawyer, told iGB: “The one thing I will say from my video games industry perspective is that we would generally not consider loot boxes to be similar to regulated gambling, not least because they generally don’t allow any cash-out and you never ‘lose’ what you pay, since the boxes always contain (random) items, but are generally never empty.”

According to the draft traders offering such features would have to disclose the types of items available and the probability of obtaining them. 

The information would need to be clear and prominent, so consumers could see what rewards a paid offer contains and the chance of receiving each relevant item before spending.

“Traders offering or making available to consumers paid-for variable reward systems shall inform consumers about the types of products or virtual items available in such variable reward systems and the probability of obtaining them,” said the EU act.

Opportunity to switch off

The article would also require traders to provide accessible and effective tools for consumers to switch off paid variable reward systems. The opt-out would apply to consumers generally, not just children. The proposal does not prescribe a single technical design for the tools.

For minors, the draft goes further: paid variable reward systems could not be offered in products directed at children or where the trader knows with reasonable certainty that the product is being used by a child. 

It stated: “Where a trader’s products are directed at minors or where the trader is aware with reasonable certainty that the product is used by minors, the trader shall not offer paid-for variable reward systems to minors.” 

The restrictions would cover randomised rewards purchased wholly or partly through money or paid-for virtual currency, rather than every random reward in a game. 

Influencer marketing and gambling products

Recital 55, an explanation of why a law has been recommended, set out the Commission’s concern that children may view influencers as friends and fail to recognise commercial recommendations. 

It said influencers may exploit that trust by obscuring the commercial purpose of posts, using gender stereotypes or appealing to gender-specific vulnerabilities.

The recital named betting, lotteries, speculative instruments and other gambling products as examples of products that may be harmful or unsuitable, particularly for children. 

“Some influencers also engage in the marketing of products that could be harmful, or otherwise unsuitable for consumers in general or to minors in particular, such as speculative instruments, betting, lotteries or other forms of gambling products,” said the EU Act. 

It also referred to existing restrictions on advertising certain products, including rules that apply generally, to advertising directed at minors or to particular actors.

Enforcement and next steps

The Digital Fairness Act remains a legislative proposal. It must be negotiated and adopted by the European Parliament and the Council before it can take effect. If passed in its current form, the Regulation would apply 12 months after entering into force.

Concerns surrounding loot boxes and its relationship to gambling has been a consistent conversation across Europe. 

A survey undertaken in Sweden last year focusing on individuals within the 18-24 age group showed a link between those who started purchasing loot boxes as a minor and those who went on to show problematic gambling behaviours. 

Of those that purchased loot boxes before the age of 15, 87% displayed risky gambling behaviours as adults. 

Elsewhere in Denmark this year, a new public awareness campaign aimed at informing parents about gambling-like features embedded within children’s video games was launched.

Anders Dorph, director of the Danish Gambling Authority, emphasised that while the debate typically centres on how long children spend gaming, it was equally important to understand the psychological impact of the games’ reward systems.

“The debate about children and digital media is often about screen time. But it is also important to take an interest in the content of the games and the mechanisms that children encounter when they game,” Dorph explained.