Gamble-to-Win: Regulating Video Game Loot Boxes Under the FTCâ•Žs Unfair and Deceptive Practices Doctrines

Journal of Business & Technology Law Journal of Business & Technology Law

Volume 18 Issue 2 Article 7

Gamble-to-Win: Regulating Video Game Loot Boxes Under the Gamble-to-Win: Regulating Video Game Loot Boxes Under the

FTC’s Unfair and Deceptive Practices Doctrines FTC’s Unfair and Deceptive Practices Doctrines

Cole Shardelow

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Gamble-to-Win: Regulating Video Game Loot Boxes Under the FTC’s Unfair and Deceptive

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Gamble-to-Win: Regulating Video Game

Loot Boxes Under the FTC’s Unfair and

Deceptive Practices Doctrines

COLE SHARDELOW*

INTRODUCTION

Teenager Jonathan Peniket is an avid player of the soccer video game series FIFA,

and he fondly remembers playing the series’ games since the release of FIFA 2005.

In 2009, FIFA offered a new game mode called Ultimate Team, in which users could

spend real money to purchase trading cards of their favorite soccer players and use

those players within the game.

To acquire new soccer players, FIFA users could not

purchase specific trading cards outright; instead, users purchased packs containing

random cards with soccer players of varying quality.

As Peniket began purchasing

card packs, he repeatedly failed to receive his favorite players.

The impulse to see

if he could get lucky and receive a quality player combined with stress from school

created a compulsive need to buy more packs.

By the time his purchasing spree

ended, Peniket had spent almost £3,000—his entire college savings.

The

randomized trading card feature FIFA used is known as a loot box, and it is one of

many games that offers such a feature.

Alexi Pfeffer-Gillett and the editors of the Journal of Business & Technology Law for their valuable ideas and

feedback. I would especially like to thank my parents, Scott and Diane Shardelow, and Lucy Nielsen for their

endless love and encouragement.

. Felicity Hannah & Jane Andrews, Loot Boxes: I Blew my University Savings Gaming on FIFA, BBC (July 9,

2020), https://www.bbc.com/news/business-53337020.

. Id.

. Id. (“I was throwing £80 into the game four or five times a night.”). Peniket’s anxious encounters with

video game loot boxes are far from unique. See, e.g., Ellen McGrody, For Many Players, Lootboxes Are a Crisis

That’s Already Here, VICE (Jan. 30, 2018, 2:08 PM), https://www.vice.com/en/article/kznmwa/for-many-

players-lootboxes-are-a-crisis-thats-already-here (recounting testimony of players experiencing addiction,

shame, depression, and suicidal thoughts because of excessive loot box purchases).

. Hannah & Andrews, supra note 1.

. See, e.g., David Zendle et al., The Prevalence of Loot Boxes in Mobile and Desktop Games, 115 ADDICTION

1768, 1770 (2020) (finding 59% of the top grossing mobile games on iPhone contained loot boxes).

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Loot boxes are in-game rewards that are earned through either playing a game

or spending real money.

A loot box’s defining feature is its randomized rewards, in

which the player has a certain probability of receiving each type of reward within

the loot box.

For example, a loot box may present a high probability of rewarding

a bland outfit for a user’s in-game character but only offer a small chance of

rewarding an eye-catching, unique outfit.

Loot boxes provide a significant and continuously growing source of revenue for

the video game industry. Players spent an estimated $15 billion on loot boxes in

2020, and these purchases are expected to generate $20 billion by 2025.

In 2023,

loot boxes are predicted to be one of the central forces driving an estimated 30%

increase in the value of the gaming industry.

While loot boxes are a financial boon for the video game industry, mounting

evidence suggests they are a financial and mental burden for users.

Studies have

found a correlation between loot box usage and gambling behaviors.

Researchers

from the universities of Plymouth and Wolverhampton found just 5% of loot box

purchasers produced 50% of loot box revenues.

One major cause of addictive loot

box behaviors is in how loot boxes are designed. For instance, many loot boxes

obfuscate their actual cost by requiring multiple virtual currency exchanges or by

hiding the probability of receiving rare items.

These tactics were used to drive loot

box purchases in Diablo Immortal, in which an estimated $100,000 is required to

fully upgrade an in-game character.

. Isobel Hamilton, There’s a Debate Raging in Video Games Over Whether Loot Boxes Should be Classified

as Gambling, BUSINESS INSIDER (July 5, 2020, 5:22 AM), https://www.businessinsider.com/classifying-video-

game-loot-boxes-as-gambling-2020-7.

. Id.

. Matt Gardner, The Gaming Industry’s Loot Box Problem is About to Get Worse, FORBES (Mar. 11, 2021,

5:00 AM), https://www.forbes.com/sites/mattgardner1/2021/03/11/the-gaming-industrys-loot-box-problem-

is-going-to-get-worse/?sh=5b60c8fc4425.

. Id.

. See infra text accompanying notes 14–17.

. E.g., Kengo Yokomitsu et al., Characteristics of Gamers who Purchase Loot Box: A Systematic Literature

Review, 8 CURRENT ADDICTION REPS. 481, 481 (2021); Stuart Gordon Spicer et al., Loot Boxes and Problem

Gambling: Investigating the “Gateway Hypothesis”, ADDICTIVE BEHAVS., August 2022, at 1, 1 (finding loot box

purchases lead to future gambling and vice versa).

. JAMES CLOSE & JOANNE LLOYD, LIFTING THE LID ON LOOT-BOXES: CHANCE-BASED PURCHASES IN VIDEO GAMES AND THE

CONVERGENCE OF GAMING AND GAMBLING 3 (2021).

. Id. at 2.

. Paul Tassi, ‘Diablo Immortal’ Player Spends $100K to Max His Character, Now Too Powerful to

Matchmake, FORBES (Aug. 7, 2022, 11:52 AM), https://www.forbes.com/sites/paultassi/2022/08/07/diablo-

immortal-player-spends-100k-to-max-his-character-now-too-powerful-to-matchmake/?sh=b52ea6b58df5.

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The United States is sorely lacking loot box regulations.

Consumers have

neither federal nor state statutory protections against loot boxes,

but not for a

lack of trying. State loot box regulations have failed to garner sufficient support to

pass in state legislatures,

while a federal bill introduced in 2019 and referred to

committee has seen no action since then.

Although legislative remedies in the United States are languishing, video game

companies could face one final boss in their quest to keep loot boxes deregulated:

the Federal Trade Commission (“FTC”).

The FTC has broad authority to regulate

“unfair or deceptive acts or practices in or affecting commerce.”

This regulatory

power gives the FTC the ability to proscribe a practice as either unfair, deceptive,

or both.

The possibility of the FTC regulating loot boxes as unfair or deceptive is

not hypothetical, as the FTC has already used this authority to regulate in-game

purchases.

Further, the FTC itself showed an interest in monitoring loot box

practices when it hosted a workshop discussing loot boxes with industry

representatives and advocacy groups.

Finally, a more recent investigatory request

sent on behalf of sixteen advocacy groups may press the FTC to move from

workshop discussions to regulatory action.

. See Daniel Cermak, Note, Micro-Transactions, Massive Headaches: International Regulation of Video

Game Loot Boxes, 28 MICH. ST. INT’L L. REV. 273, 303 (2020) (dubbing the United States’ loot box landscape “The

Wild, Wild West of Loot Boxes”).

. See id. (“Neither the United States Federal government nor its individual states have passed official

legislation declaring loot boxes as gambling.”); Jason Egielski, Note, Don’t Hate the Player, Hate the Game: Video

Game Loot Boxes, Gambling, and a Call for Administrative Regulation, 50 HOFSTRA L. REV. 175, 186 (2021)

(discussing criticism that loot boxes are “unregulated gambling”).

. See, e.g., Egielski, supra note 19, at 185 n.125 (listing state loot box bills in Hawaii and Washington that

failed to pass).

. S. 1629, 116th Cong. (2019).

. See Inside the Game: Unlocking the Consumer Issues Surrounding Loot Boxes, FTC,

https://www.ftc.gov/news-events/events/2019/08/inside-game-unlocking-consumer-issues-surrounding-

loot-boxes (last visited Oct. 19, 2022) (illustrating the FTC’s interest in loot box oversight by hosting a loot box

workshop on Aug. 7, 2019).

. 15 U.S.C. § 45(a)(1).

. See generally Thomas Leary, Former Comm’r, FTC, Unfairness and the Internet (Apr. 13, 2000)

[hereinafter Unfairness and the Internet] (describing application of unfair practices doctrine to the internet),

https://www.ftc.gov/news-events/news/speeches/unfairness-internet; letter entitled “FTC Policy Statement

on Deception” from James Miller, Chairman, FTC, to the Hon. John Dingell, Chairman, Committee on Energy

and Commerce (Oct. 14, 1983) [hereinafter Statement on Deception] (outlining the FTC’s deceptive practices

doctrine), https://www.ftc.gov/legal-library/browse/ftc-policy-statement-deception.

. See FTC v. Amazon.com, Inc., 71 F. Supp. 3d 1158, 1160, 1166 (W.D. Wash. 2014) (denying Amazon’s

motion to dismiss, in part, because substantial injury to adult consumers may be caused by apps that induce

children to make in-game purchases).

. See supra note 22.

. See letter from Haley Hinkle, Policy Counsel, Fairplay, and Katharina Kopp, Deputy Director and Director

of Policy, Center for Digital Democracy, to the commissioners of the FTC, at 4, 7 (June 2, 2022) [hereinafter

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Considering the potential dangers loot boxes pose to children and the FTC’s

broad ability to deter unfair and deceptive practices, the FTC can and should

regulate video game loot boxes. Thus, Section I discusses the origins of in-game

purchases, known as microtransactions, and their transformation into loot boxes.

Section II analyzes loot box design and its effects on consumers.

Finally, Section III

describes the FTC’s ability to regulate unfair and deceptive practices and argues that

video game loot boxes are unfair and deceptive practices under the FTC Act.

I. FROM PIXELS TO PURCHASES: THE DEVELOPMENT OF

MICROTRANSACTIONS AND LOOT BOXES

In its initial decades, the video game industry sold games as one complete piece of

content.

It was not until the 2000s that video game companies began adding

content accessible through subsequent in-game purchases,

known as

microtransactions.

The prefix “micro” in microtransaction denotes the amount of

content the transaction provides, as it is often a small fraction of the entire game’s

content.

Microtransactions can generally be broken into four types: cosmetic

microtransactions, content microtransactions, pay-to-win microtransactions, and

loot boxes.

A. Cosmetic Microtransactions

Cosmetic microtransactions are purchases that provide an aesthetic benefit to a

player within a game.

Cosmetic microtransactions offer no gameplay advantage

to players and are only used to personalize a player’s experience.

For instance,

Microsoft’s first foray into microtransactions was through the video game The Elder

Investigation Request] (requesting the FTC investigate Electronic Arts for committing unfair and deceptive

practices in the way it designed loot boxes within FIFA: Ultimate Team), https://fairplayforkids.org/wp-

content/uploads/2022/06/LootboxLetter.pdf.

. See infra Section I.

. See infra Section II.

. See infra Section III.

. David Zendle et al., The Changing Face of Desktop Video Game Monetisation: An Exploration of

Exposure to Loot Boxes, Pay to Win, and Cosmetic Microtransactions in the Most-Played Steam Games of 2010-

2019, PLOS ONE, May 7, 2020, at 1, 1.

. See Mike Williams, The Harsh History of Gaming Microtransactions: From Horse Armor to Loot Boxes,

US GAMER (Oct. 11, 2017), https://www.usgamer.net/articles/the-history-of-gaming-microtransactions-from-

horse-armor-to-loot-boxes (recounting the first “large-scale” microtransaction in 2006).

. Nenad Zoran Tomić, Economic Model of Microtransactions in Video Games, 1 J. ECON. SCI. RSCH. 17, 18

(2019).

. See id. (explaining microtransactions are determined “primarily by purpose, not by the amount” paid).

. Zendle et al., supra note 31, at 2.

. See, e.g., id. (describing how Fortnite players can purchase unique movements for their characters so

they can express ideas).

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Scrolls IV: Oblivion in 2006.

As part of the game, players could purchase unique

golden, silver, and other horse armor for their horse companions; the pack of horse

armor cost $2.50 for those who played Oblivion on the Xbox 360 video game

console and $1.99 for those who played on computers.

The game Fortnite offers

a more troubling example.

Unlike Oblivion, Fortnite tempts players with the

promise of free gameplay.

Once in the game, players are showered with a plethora

of microtransactions, including cosmetic microtransactions such as character

animations, loading screen art, and character outfits such as Spider-Man, Batman,

and Darth Vader.

B. Content Microtransactions

Content microtransactions add substantive features to a game without giving

players an advantage that would create imbalances.

Some types of additional

features include “new missions in action games, new nations and new scenario

packages in strategic games, [and] new vehicles or tracks in racing games.”

These

microtransactions originated in the 1980s as expansion packs for games such as

Xanadu: Dragon Slayer II.

The original game has players fighting enemies in a

maze-like fantasy setting, and the expansion pack added new maps, enemies, and

an entirely new feature allowing players to trade items.

Since then, game

developers have attempted to monetize their games in every way possible through

content microtransactions—to the point where a game’s entire premise is changed

to entice more purchasers.

For example, the base game of Red Dead Redemption

is a classic Wild West environment; its Undead Nightmare expansion pack,

however, turns the game into a zombie survival scenario.

. Williams, supra note 32.

. Id. (capturing a photo of the golden and silver horse armor in Oblivion).

. Joseph Yaden, 5 Years Ago, Epic Games Made the Most Influential Shooter of All Time, INVERSE (July 25,

2022), https://www.inverse.com/gaming/fortnite-5th-anniversary.

. Williams, supra note 32; Yaden, supra note 39.

. Yaden, supra note 39.

. Tomić, supra note 33, at 18.

. Id.

. See Xanadu: Scenario 2, MOBY GAMES, https://www.mobygames.com/game/xanadu-scenario-ii (last

visited Oct. 23, 2022) (describing the expansion pack to the video game Xanadu: Dragon Slayer II).

. Id.

. See, e.g., Kristine Steimer, Red Dead Redemption: Undead Nightmare Review, IGN (Aug. 16, 2021, 3:32

PM), https://www.ign.com/articles/2010/10/27/red-dead-redemption-undead-nightmare-review (describing

how an expansion to Red Dead Redemption alters it from a Wild West to a zombie survival game).

. Id.

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C. Pay-to-Win Microtransactions

A pay-to-win microtransaction derives its name from the in-game advantage it

grants players who purchase it.

Pay-to-win microtransactions can grant one of two

types of advantages: a timing advantage or an exclusivity advantage.

A timing

advantage quickens a player’s ability to level up or progress through a game.

Players are often incentivized to purchase timing advantages because developers

shrewdly design their games to require impracticable amounts of time or effort to

progress.

The developers of the game Star Wars Battlefront 2 incentivized timing

advantages by offering a more expensive version of the game that provided

immediate weapon bonuses to a player’s soldiers, whereas those bonuses would

take normal players hours to acquire.

On the other hand, exclusivity advantages

grant purchasing players features that non-purchasing players do not have the

ability to acquire.

Metal Gear Survive used this microtransaction by requiring

players to pay $9.99 to receive a second save slot—a feature that allows a player to

have an extra character.

Without this feature, non-purchasing players who would

like to try a new character are forced to delete their one allotted save and thus lose

their progress in the game.

D. Loot Boxes

Loot boxes are the culmination of the previous microtransactions into a gambling-

like package. A loot box randomly grants a player one or more of a set of possible

. Tomić, supra note 33, at 19.

. See Zendle et al., supra note 31, at 2 (providing examples of pay-to-win microtransactions that allow

players to level up more quickly or that grant new, advantageous abilities).

. E.g., id. (describing a timing advantage in Assassin’s Creed: Odyssey in which players purchase a “boost”

to level up more quickly).

. See FORBRUKERRÅDET, INSERT COIN: HOW THE GAMING INDUSTRY EXPLOITS CONSUMERS USING LOOT BOXES 20–21

(2022) (warning of games that add “‘busywork’ for which players are encouraged to pay real money to skip”).

. Dave Thier, You Can Still Pay-to-Win in ‘Star Wars Battlefront 2’, FORBES (Nov. 18, 2017, 3:45 PM),

https://www.forbes.com/sites/davidthier/2017/11/18/you-can-still-pay-to-win-in-star-wars-battlefront-

2/?sh=5260d4464a63.

. E.g., Zendle et al., supra note 31, at 2 (explaining a microtransaction that gives players the ability to

sneak up on other players).

. Erik Kain, Konami is Charging Real Money for ‘Metal Gear Survive’ Save Slots, FORBES (Feb. 23, 2018,

11:36 AM), https://www.forbes.com/sites/erikkain/2018/02/23/shameless-konami-charges-money-for-metal-

gear-survive-save-slots/?sh=4365e50d22eb.

. See id. (warning the only way to gain an additional save slot without purchase is by “deleting your first

save”).

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rewards.

A loot box often contains either cosmetic rewards

or play-to-win

advantages.

Loot boxes owe much of their origins to Japan, where gachapon

features—named after vending machines that give out random toys

—emerged

from games like MapleStory in 2004.

Using an in-game replica of a gachapon

machine, MapleStory players would exchange a ticket for a random item.

The

gachapon format grew rapidly in mobile games in the 2010s.

Though these mobile

games were simple, their ability to “fool[] your brain” into persistently playing

generated revenues of $1 billion.

The first games specifically featuring loot boxes developed along a parallel

timeline to gachapon games and originated in China with the 2006 game ZT

Online.

ZT Online established loot boxes’ now common gimmicks—a virtual

treasure chest displaying all potential rewards “on a circle reminiscent of Wheel of

Fortune” and opened by a key the player must acquire

—and its success

exacerbated the growth of games with both free-to-play and loot box features.

a result, the 2010 game Team Fortress 2 carried over the visual design of discrete,

boxed rewards to the Western video game industry by giving players the option of

either purchasing keys or repeatedly playing the game to unlock loot boxes.

An additional type of loot box—packs of randomized trading cards—emerged in

Western sports games through the soccer game UEFA Champions League 2006-

. See supra text accompanying notes 8–10.

. E.g., Tyler Colp, Overwatch Loot Box Hoarders Say Goodbye, PC GAMER (Sep. 14, 2022),

https://www.pcgamer.com/overwatch-loot-box-hoarders-say-goodbye/ (describing the “assortment of skins

and other cosmetic items” that came from loot boxes in the game Overwatch).

. E.g., Investigation Request, supra note 27, at 1–2 (explaining how “more powerful” soccer players in

FIFA: Ultimate Team are acquired by purchasing loot boxes).

. DARIUS GAMBINO, FROM GACHAPON TO VIDEO GAME DLC: A BRIEF HISTORY OF LOOT BOXES, GAMBLING AND THE LAW

2 (2022).

. Johnny Vito, The Evolution of Loot Boxes, Crates, and UT Cards, PLAYSTATION UNIVERSE (Sep. 9, 2021),

https://www.psu.com/news/the-evolution-of-loot-boxes-crates-and-ut-cards/.

. Id.

. See, e.g., Steven Wright, The Evolution of Loot Boxes, PC GAMER (Dec. 8, 2017),

https://www.pcgamer.com/the-evolution-of-loot-boxes/ (discussing the success of a gachapon mobile game

under the subheading “Mobile mutations”).

. Id. (pointing out how the design of the game Puzzles & Dragons persuaded players to continue

purchasing gachapons).

. See id. (discussing loot box origins in ZT Online).

. Id.

. See GAMBINO, supra note 59, at 2 (explaining how ZT Online “legitimized loot boxes as a revenue

stream” and encouraged the growth of free to play games after its release).

. Wright, supra note 62.

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2007.

Video game developer Electronic Arts (“EA”) would use this model in

basketball,

football, and even sci-fi action and horror games.

Eventually, with the release of Star Wars: Battlefront II, developers pushed the

loot box format to a point so predatory that it received intense pushback from both

players and the broader public.

Battlefront II is a multiplayer shooter game where

players improve their weapons and abilities by obtaining star cards.

Star cards

could either be obtained by successfully progressing through the game or by

purchasing them through loot boxes.

Although players could technically acquire

star cards by playing the game, doing so was practically impossible; unlocking every

star card required an estimated 4,528 hours, or over six months of playtime.

This

system all but ensured players who did not purchase loot boxes would have no

ability to compete against loot box purchasers who could easily obtain star cards.

The fierce backlash to the unbalanced star card system by players, regulators,

and

Star Wars’ owner Disney eventually persuaded the developer of Battlefront II to

remove the ability to purchase star cards.

II. LOOT BOX DESIGN AND ITS ADDICTIVE EFFECTS ON PLAYERS

A loot box’s presentation is the main cause of addictive player purchases. As

explained below, loot boxes are carefully designed to tempt players into making as

many purchases as possible. These designs have devastating effects on players’

financial and social health.

. Id.

. See GAMBINO, supra note 59, at 3 (discussing NBA 2K13’s use of trading cards within a game mode called

MyTeam).

. See Wright, supra note 62 (stating EA adds trading cards “to nearly every sports game they make,”

including Madden; EA also added card packs to sci-fi action game Mass Effect 3 and sci-fi horror game Dead

Space 3).

. See GAMBINO, supra note 59, at 7 (finding Star Wars: Battlefront II “received the most press in the

argument over loot boxes”).

. Id.

. Matt Davidson, Someone’s Estimated How Long it Takes to Unlock Everything in Star Wars: Battlefront

2 (Too Long), IGN (Nov. 15, 2017, 9:53 AM), https://www.ign.com/articles/2017/11/15/someones-estimated-

how-long-it-takes-to-unlock-everything-in-star-wars-battlefront-2-too-long.

. See GAMBINO, supra note 59, at 7 (warning that the unbalanced star card system “would have otherwise

resulted in many players simply investing in loot boxes, and dominating the game”).

. See Wright, supra note 62 (discussing player pushback against star cards and how regulators began to

consider classifying them as gambling).

. See GAMBINO, supra note 59, at 7 (describing how “loot boxes were limited to cosmetic items only” after

star card backlash).

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A. The Alluring Design Features of Loot Boxes

Loot boxes contain two design features that incentivize players to repeatedly

purchase them: the unclear probability of receiving a rare item, and the

presentation and functionality of loot boxes.

Typically, their presentation comes

in the form of confusing design practices called dark patterns.

1. Probability Disclosures

Players are unable to determine the likelihood of receiving a quality reward from a

loot box because of the confusing ways in which probabilities are disclosed.

Initially, the probability of receiving some items in a loot box is astronomically small,

with some rewards having only a 0.0008% chance of being won.

Loot boxes also

use unintuitive probabilities.

First, loot boxes do not have visual cues indicating

the probability of success that, for instance, dice have.

Further, the probability of

receiving a loot box reward at any one time constantly changes based on the

amount of times a player has purchased a loot box

or on behavioral data collected

by the game.

Finally, the large amount of potential rewards in a loot box—1000

items for some games

—further obscures the probability of receiving a reward and

requires players to purchase a larger number of loot boxes to receive the particular

reward they want.

. See FORBRUKERRÅDET, supra note 51, at 13–22 (discussing the exploitative probabilities, presentations,

and functions that lead consumers to purchase loot boxes).

. Rebekah Valentine, Consumer Advocates to ESRB, FTC: Loot Box Odds Disclosure is Not Enough, GAMES

INDUSTRY (Aug. 7, 2019), https://www.gamesindustry.biz/consumer-advocates-to-esrb-ftc-loot-box-odds-

disclosure-is-not-enough.

. See id. (finding probability disclosures futile because they fail to encapsulate the complexity of loot

boxes); see generally Leon Y. Xiao et al., Probability Disclosures are not Enough: Reducing Loot Box Reward

Complexity as a Part of Ethical Video Game Design, J. GAMBLING ISSUES, May 13, 2022, at 1 (describing the obtuse

nature of probabilities in loot boxes).

. Leon Y. Xiao et al., What are the Odds? Lower Compliance with Western Loot Box Probability Disclosure

Industry Self-Regulation than Chinese Legal Regulation 3 (Sep. 30, 2021) (unpublished manuscript).

. Xiao et al., supra note 80, at 3.

. See id. (explaining how loot boxes have no visual probability cue like a roulette wheel does and that

games such as Golden HoYeah alter the probability of rolling certain numbers on a die).

. See id. at 4 (noting how some games use a “pity-timer” that increases the chance of winning a rare loot

box reward if the player has repeatedly purchased a loot box without success).

. See FORBRUKERRÅDET, supra note 51, at 16–17 (describing how consumer data points, such as “likelihood

to spend money,” lead to adjustments to the probability of loot box rewards).

. Nick Ballou et al., The Hidden Intricacy of Loot Box Design: A Granular Description of Random Reward

Mechanisms in Games 7 (Nov. 22, 2020) (unpublished manuscript) (on file with the Digital Games Research

Association) (categorizing some video games as having thousands of rewards in one “pool” of a loot box).

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Some video game developers provide loot box probability disclosures in

accordance with a nation’s or industry association’s requirements,

but such

requirements often fail to adequately address the unclear nature of loot box

probabilities. For example, China’s probability disclosure requirement has failed to

ensure 4.4% of the top-selling Chinese video games provide disclosures.

Industry

self-regulation fares even more poorly, with only 64% of the top 100 grossing

iPhone games with loot boxes in the UK disclosing their probabilities.

Further,

even if a developer discloses probabilities about their games, many of those

disclosures exist only on the game’s website.

Finally, because of the constantly

fluctuating and obtuse nature of loot box probabilities,

a typical player would be

unlikely to understand the actual probability even if a disclosure was given.

2. Dark Patterns

Alongside confusing probabilities, loot boxes use a particularly alluring and

misleading technique called dark patterns. Dark patterns are “design practices that

trick or manipulate users into making choices they would not otherwise have made

and that may cause harm.”

A simple example of a dark pattern occurs when a

website is designed to sneak items into an online shopping cart without the consent

of the user.

Dark patterns exist within a variety of online contexts, including in

apps, websites, and games.

To successfully deceive users into acting against their

interests, dark patterns often prey on users’ cognitive biases.

Many attempts have

been made to broadly categorize dark patterns.

Relevant types of dark patterns

. See Leon Y. Xiao et al., Gaming the System: Suboptimal Compliance with Loot Box Probability Disclosure

Regulations in China, BEHAV. PUB. POL’Y, May 18, 2021, at 1, 4 [hereinafter Gaming the System] (stating China’s

probability disclosure requirement); cf. Leon Y. Xiao, ESRB’s and PEGI’s Self-Regulatory ‘Includes Random Items’

Labels Fail to Ensure Consumer Protection, 19 INT’L J. MENTAL HEALTH AND ADDICTION 2358, 2358 (2020) (discussing

loot box disclosure requirement for North American and European video game industry regulators ESRB and

PEGI).

. Gaming the System, supra note 87, at 12.

. Xiao et al., supra note 81, at 17–18.

. See Gaming the System, supra note 87, at 12 (finding 38.5% of disclosures of top grossing Chinese

mobile games existed on the game’s website only).

. See supra notes 83–86 and accompanying text.

. See Xiao et al., supra note 80, at 4 (“When decision-making environments are complex, consumers are

likely to . . . fail to correctly account for all relevant data.”).

. FED. TRADE COMM’N, BRINGING DARK PATTERNS TO LIGHT 2 (2022).

. Id. at 1.

. See id. at 3 (discussing sources of dark patterns “including ecommerce, cookie consent banners,

children’s apps, subscription sales, and more”).

. See Jamie Luguri & Lior Jacob Strahilevitz, Shining a Light on Dark Patterns, 13 J. LEGAL ANALYSIS 43, 44

(2021) (finding dark patterns employ “framing effects, the sunk cost fallacy, and anchoring”).

. See generally Arunesh Mathur et al., What Makes a Dark Pattern . . . Dark?: Design Attributes,

Normative Considerations, and Measurement Methods, CHI CONF. ON HUM. FACTORS COMPUTING SYS., May 2021, at

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include intermediate currency, confirmshaming, and urgency dark patterns.

Intermediate currency dark patterns obscure the actual cost of an item by hiding it

behind one or more virtual currencies; games such as Clash of Clans use this method

by presenting multiple tiers of in-game currency and requiring certain items be

purchased with particular currencies.

Video games might also employ

confirmshaming, which occurs when a choice is framed to make one option seem

irrational or wrong.

100

Finally, urgency dark patterns coerce users into making

purchases through limited time offers or countdown timers.

101

FIFA 22 uses both a

limited time offer and countdown timer by featuring “lightning round” loot box

sales, in which a limited quantity of rare soccer player packs are available for

purchase worldwide and players are reminded of the sale by a visual tracker that

counts down the quantity of packs available.

102

Loot boxes also capitalize on dark patterns specific to video games.

103

Two

relevant types of video game dark patterns are temporal and monetary dark

patterns, each of which has its own subtypes.

104

A video game feature is deemed a

temporal dark pattern based on the answers to the following questions: “Can the

player develop a sense of the time commitment necessary to successfully play the

game? Are the player’s expectations of the time commitment significantly at odds

with the actual time required? How likely are players to feel they ‘wasted their

time’?”

105

A feature can be found a monetary dark pattern by similarly asking the

following questions:

How likely is the player to regret having spent money to play the game?

How likely is the player to “lose track” of how much money he spends

while playing the game? Is the player aware of what she is getting in

return for their money when she spends it? . . . Is the player aware of how

1; Colin M. Gray et al., The Dark (Patterns) Side of UX Design, CHI CONF. ON HUM. FACTORS COMPUTING SYS., Apr.

2018, at 1; Harry Brignull, Types of Deceptive Design, DECEPTIVE DESIGN, https://www.deceptive.design/types

(last visited Oct. 26, 2022).

. See Luguri & Strahilevitz, supra note 96, at 53 (listing types of dark patterns).

. See Valentine, supra note 79 (“[G]ames such as Clash of Clans obfuscate the amount that certain things

cost by distancing the final items . . . from the real money being spent”).

100

. Luguri & Strahilevitz, supra note 96, at 53 (defining confirmshaming as a “[c]hoice framed in a way that

makes it seem dishonorable, stupid”); cf. FORBRUKERRÅDET, supra note 51, at 14 (describing how loot boxes

attempt to create a fear of missing out among players).

101

. Luguri & Srahilevitz, supra note 96, at 53 (explaining countdown timer and limited offer dark patterns).

102

. FORBRUKERRÅDET, supra note 51, at 26.

103

. See José P. Zagal et al., Dark Patterns in the Design of Games, 2013 SOC’Y FOR ADVANCEMENT SCI. DIGIT.

GAMES 39, 41–44 (describing types of video game dark patterns).

104

. See id. at 41–43 (discussing temporal and monetary dark patterns).

105

. Id. at 41.

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much money he will have to spend in order to achieve his goals in the

game?

106

Grinding is one type of temporal dark pattern used in loot boxes.

107

A grinding

dark pattern is aptly named for video game designs that force players to perform

“repetitive and tedious tasks.”

108

Grinding acts as a dark pattern by coercing players

into gaming for unnecessary amounts of time for the purpose of progressing in the

game or receiving a reward.

109

It is used to frustrate players to the point where they

would consider purchasing a loot box to more quickly progress in the game.

110

the extreme end of grinding, FIFA 22 requires users wishing to receive a single

soccer player loot box containing the best players to either purchase the loot box

or play the game for 35 hours.

111

Pay-to-win microtransactions are also a type of monetary dark pattern.

112

Pay-

to-win game designs coerce purchases that players would not have made otherwise

by exploiting a player’s social or competitive nature.

113

For example, Raid: Shadow

Legends uses a global messaging system that constantly notifies players every time

another player receives a high quality character from a loot box.

114

Thus, players

feel compelled to purchase loot boxes in the hopes that they, too, will receive a

similarly high quality character.

115

This dark pattern, like many others, plays off of

cognitive biases that manipulate players into following social trends.

116

B. The Effects of Loot Boxes on Players

Loot boxes make players financially irresponsible to the point where they begin to

harm themselves and those closest to them. In particular, loot boxes impact the

behavioral, mental, and financial wellbeing of players.

117

These effects are felt most

106

. Id. at 42.

107

. Id. at 41–42.

108

. Id. at 41.

109

. Id. at 41–42.

110

. FORBRUKERRÅDET, supra note 51, at 21.

111

. Id. at 34 (describing the amount of coins and playtime required for a Jumbo Rare Gold Player Pack).

112

. Zagal et al., supra note 103, at 43 (“Monetized Rivalries is a pattern . . . colloquially known as ‘Pay to

Win.’”).

113

. See id. at 43 (describing how pay-to-win dark patterns encourage spending by pressuring players “to

achieve . . . a high placement on a leaderboard”).

114

. FORBRUKERRÅDET, supra note 51, at 43.

115

. Id. at 44.

116

. See id. (describing a cognitive bias known as the bandwagon effect); Bandwagon Effect, APA DICTIONARY

OF PSYCHOLOGY, https://dictionary.apa.org/bandwagon-effect (last visited Oct. 29, 2022) (“Bandwagon effect:

the tendency for people in social . . . situations to . . . do or believe things because many other people appear

to be doing or believing the same.”).

117

. See infra notes 121–137 and accompanying text.

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intensely by younger players who are “among the most avid consumers of . . . video

games.”

118

Estimates have found more than half of adolescent players engaged with

loot boxes and nearly one in five adolescent players purchased a loot box within a

12 month span.

119

Other estimates have found 25-40% of adolescent players have

purchased at least one loot box.

120

First, loot boxes have been repeatedly shown to produce addictive and gambling

behaviors.

121

In fact, the more an individual engages with loot boxes, the more they

exhibit gambling symptoms.

122

At the same time, excessive loot box purchases may

create a positive feedback loop with gambling in which loot box purchases lead to

gambling and vice versa.

123

The practical effect of loot box gambling is illustrated by

estimates that 5% of loot box purchasers make up half of all loot box revenues.

124

This problem is particularly concentrated in adolescents, who are twice as likely to

engage in loot box gambling compared to adults.

125

Second, loot box purchases adversely affect players’ mental health because they

lead to a form of excessive gaming known as “problem video gaming.”

126

Problem

video gaming is a psychological addiction to video games and is “characterized by

symptoms similar to those of substance use and gambling disorder.”

127

The problem

gaming produced by loot box purchases correlates with risks such as social isolation,

family conflict, and the potential to drop out of school.

128

Further, problem gaming

is linked to suicidal thoughts and “likely . . . suicide attempts.”

129

Many players have

admitted to facing these traumatic experiences.

130

118

. Daniel L. King & Marc N. Potenza, Not Playing Around: Gaming Disorder in the International

Classification of Diseases (ICD-11), 64 J. ADOLESCENT HEALTH 5, 5 (2019).

119

. Soren Kristiansen & Majbritt C. Severin, Loot Box Engagement and Problem Gambling Among

Adolescent Gamers: Findings from a National Survey, ADDICTIVE BEHAVS., April 2020, at 1, 3.

120

. CLOSE & LLOYD, supra note 15, at 15.

121

. See, e.g., id. at 2 (“[R]elationships between loot box engagement and problem gambling have been

robustly verified in around a dozen studies.”).

122

. Id. at 15.

123

. Spicer et al., supra note 14, at 1 (19.87% of study participants reported loot boxes led to future

gambling and vice versa).

124

. CLOSE & LLOYD, supra note 15, at 3.

125

. David Zendle et al., Adolescents and Loot Boxes: Links with Problem Gambling and Motivations for

Purchase, ROYAL SOC’Y OPEN SCI., June 2019, at 1, 17.

126

. Wen Li et al., The Relationship of Loot Box Purchases to Problem Video Gaming and Problem Gambling,

97 ADDICTIVE BEHAVS. 27, 32 (2019).

127

. Id. at 28.

128

. See King & Potenza, supra note 118, at 5 (describing effects of excessive gaming over 12 months).

129

. Eilin K. Erevik et al., Problem Gaming and Suicidality: A Systematic Literature Review, ADDICTIVE BEHAVS.

REPS., June 2022, at 1, 1.

130

. See supra note 5.

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Finally, players lose control of their spending habits as a result of loot boxes’

addictive qualities.

131

A UK report found 25% of younger players spent at least £100

for every video game they play.

132

Around one third of players failed to track their

loot box spending habits, and a similar percentage “did not feel in control of their

spending on loot boxes.”

133

Those closest to a player, knowingly or not, often

perpetuate the player’s spending spiral, as the following illustrates:

One in six (15%) had taken money from their parents without permission

to buy a loot box; and one in ten (9%) had borrowed money they couldn’t

repay, while one in ten (11%) had either used their parent’s credit or debit

card, or borrowed money from friends or family to do so[.]

134

While many loot box purchasers spend around $20 per month on loot boxes,

135

some purchasers spend hundreds of dollars per month.

136

These individuals do not

spend large amounts of money because they are wealthy or have disposable

income; most do so because of a gambling problem.

137

Thus, loot boxes have

contributed to widespread, addictive spending habits among players, with some

players spending extreme amounts of money as a result.

III. THE FINAL BOSS: THE FTC AND ITS UNFAIR AND DECEPTIVE

PRACTICES DOCTRINES

The FTC offers the best way to protect players from the effects of loot boxes. The

FTC should curtail problematic loot box practices because of its prominent position

in protecting consumers and its unique approach to enforcement, and because FTC

jurisprudence indicates loot boxes are unfairly and deceptively designed.

A. The FTC’s Role in Policing Loot Boxes

The FTC should regulate loot boxes through its enforcement powers. The FTC is a

federal agency tasked with “protecting the public from deceptive or unfair business

practices and from unfair methods of competition though law enforcement,

131

. See generally GAMBLING HEALTH ALLIANCE, WHAT IS THE FINANCIAL IMPACT OF LOOT BOXES ON CHILDREN AND YOUNG

PEOPLE? (2020) (describing financial impact of loot boxes on adolescents).

132

. Id. at 2.

133

. Id.

134

. Id.

135

. See CLOSE & LLOYD, supra note 15, at 24 (“[M]ost loot box purchasers spend modest amounts.”).

136

. Cf. id. at 26 (categorizing excessive loot box spenders as those paying “hundreds of pounds per

month”).

137

. See James Close et al., Secondary Analysis of Loot Box Data: Are High-Spending “Whales” Wealthy

Gamers or Problem Gamblers?, ADDICTIVE BEHAVS., June 2021, at 1, 3 (finding no correlation between loot box

purchasing and annual income while also finding one third of excessive spenders are problem gamblers).

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advocacy, research, and education.”

138

The FTC engages in advocacy, research, and

education in several ways. The FTC both contributes to and learns from consumer

research by holding workshops—one of which was a workshop on the efficacy of

loot boxes.

139

Blogs posted on the FTC’s website

140

and guidelines posted in the

federal register

141

both educate about and advocate for practices the FTC has

deemed anticompetitive; thus, the blogs and guidelines indicate acceptable

conduct to businesses. Similarly, the FTC publishes policy statements outlining its

views on anticompetitive conduct in broad commercial areas.

142

In terms of

enforcement, the FTC has the authority to conduct investigations, impose rules, and

litigate.

143

Most of the FTC’s rulemaking authority comes from its ability to establish

practices as per se unfair or deceptive if the practice occurs “commonly.”

144

The FTC

can broadly bring enforcement actions against “[u]nfair methods of competition in

or affecting commerce” and “unfair or deceptive acts or practices in or affecting

commerce.”

145

The FTC’s unfair or deceptive acts or practices powers are referred

to as its “Section 5” powers.

146

The FTC should police loot boxes through its Section 5 powers for several

reasons. First, the FTC has broad authority to determine whether a practice is unfair

or deceptive; it is not confined to making such determinations based on historical

or industry understandings of what is unfair or deceptive.

147

Second, through

multiple enforcement actions, the FTC can create a body of quasi-common-law that

provides guidelines for proper loot box design.

148

Settlements between the FTC and

138

. Mission, FTC, https://www.ftc.gov/about-ftc/mission (last visited Oct. 29, 2022).

139

. See supra note 22.

140

. See Business Guidance, FTC, https://www.ftc.gov/business-guidance (last visited Oct. 29, 2022)

(providing links to business blogs discussing FTC actions and guidance on unfair and deceptive practices).

141

. See, e.g., 16 C.F.R. §§ 255.0–255.5 (2021) (providing guidance on advertising endorsements and

testimonials).

142

. Legal Library: Policy Statements, FTC, https://www.ftc.gov/legal-library/browse/policy-statements

(last visited Oct. 29, 2022).

143

. A Brief Overview of the Federal Trade Commission’s Investigative, Law Enforcement, and Rulemaking

Authority, FTC, https://www.ftc.gov/about-ftc/mission/enforcement-authority (last visited Oct. 29, 2022).

144

. Id.

145

. 15 U.S.C. § 45(a)(1).

146

. See A Brief Overview, supra note 143 (defining Section 5 and describing unfair practices and deceptive

practices).

147

. See FTC v. Standard Educ. Soc’y, 86 F.2d 692, 696 (2d Cir. 1936) (Hand, J.) (“The Commission has a wide

latitude in such matters . . . its powers are not confined to such practices as would be unlawful before it acted;

. . . its duty . . . is to discover and make explicit those unexpressed standards of fair dealing which the conscience

of the community may progressively develop.”), rev’d in part and remanded on other grounds, 302 U.S. 112

(1937).

148

. Cf. Daniel J. Solove & Woodrow Hartzog, The FTC and the New Common Law of Privacy, 114 COLUM. L.

REV. 583 (2014) (describing the FTC’s quasi-common-law in relation to privacy law).

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businesses make up the bulk of the FTC’s enforcement actions,

149

and these

settlements often delineate the boundaries of acceptable behavior.

150

Over time,

the FTC “develops [a] body of law in a stable way” through settlements such that

“[p]ractitioners look to FTC settlements as though they have precedential

weight.”

151

The FTC has already implemented this quasi-common-law system in the

field of privacy law,

152

and it could do the same for loot boxes. Finally, using

enforcement actions is preferable to the rulemaking process because FTC

rulemaking is cumbersome to the point of being ineffective,

153

whereas

enforcement actions can best adapt to changing loot box circumstances.

The FTC may only bring a Section 5 enforcement action if it has “reason to

believe” that a business is engaging in unfair or deceptive practices and if it is in the

public interest.

154

Loot boxes employ unfair and deceptive practices and

enforcement against them is in the public’s best interest.

155

B. The FTC Should Bring Unfair and Deceptive Practices Claims Against Loot Box

Developers

The FTC should bring unfair and deceptive practices claims against video game

developers of loot boxes because of the behavioral, mental, and financial injuries

loot boxes produce

156

and because of their misleading features.

157

1. Loot Boxes are Unfair

Loot boxes are unfair because they financially drain players through addictive

features that do not sufficiently benefit players or the video game industry. An act

or practice is unfair if it “causes or is likely to cause substantial injury to consumers

which is not reasonably avoidable by consumers themselves and not outweighed

by countervailing benefits to consumers or to competition;” the FTC may also

consider “established public policies” when making its decision.

158

Thus, the

elements needed to establish unfairness include substantial consumer injury, an

149

. Id. at 610.

150

. See id. at 620–21 (settlements “signal the basic rules that [the FTC] wants companies to follow”).

151

. Id. at 620.

152

. See generally id.

153

. See id. at 620 n.176 (describing rulemaking requirements, including an “industry-wide investigation,

. . . staff reports . . . propos[ing] a rule, and engag[ing] in a series of public hearings”). This process is so tedious

that “the FTC has not engaged in [such] rulemaking in 32 years.” Id.

154

. FTC v. Raladam Co., 283 U.S. 643, 654 (1931).

155

. See discussion infra Section III.B.i.

156

. See discussion infra Section III.B.i.

157

. See discussion infra Section III.B.ii.

158

. 15 U.S.C. § 45(n).

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inability to reasonably avoid the harm, weighing benefits to consumers or

competition, and established public policies.

159

First, substantial consumer injury is an objective test of whether consumers are

likely to be substantially injured by the defendant’s practices.

160

Typical consumer

injuries are economic, health, or safety harms.

161

Emotional harms are typically not

serious enough to qualify as a substantial injury, though courts have found

exceptions to this rule.

162

An injury can be substantial if it produces small harm to a

large number of consumers or concentrates significant harm on a small number of

consumers.

163

Second, a consumer cannot reasonably avoid the harm presented by an unfair

practice if the seller “unreasonably creates or takes advantage of an obstacle to the

free exercise of consumer decision-making.”

164

Consumers are presumed to have

the ability to freely decide between goods or services in the marketplace and to

avoid harmful decisions.

165

However, practices that remove the ability of consumers

to comparison shop and thus are not reasonably avoidable include those that

“withhold or fail to generate critical price or performance data” or that “exercise

undue influence over highly susceptible classes of purchasers.”

166

The FTC has

explicitly identified younger consumers as those that could be highly susceptible to

unfair practices.

167

159

. Id.

160

. Public statement entitled “The FTC’s Use of Unfairness Authority: Its Rise, Fall, and Resurrection” from

J. Howard Beales, Former Director of the Bureau of Consumer Protection, FTC (May 30, 2003) [hereinafter

Unfairness Authority], https://www.ftc.gov/news-events/news/speeches/ftcs-use-unfairness-authority-its-

rise-fall-resurrection.

161

. Id.

162

. Letter entitled “FTC Policy Statement on Unfairness” from Michael Pertschuk et al., Chairman, FTC, to

the Hon. Wendell H. Ford et al., Chairman, Committee on Commerce, Science, and Transportation (Dec. 17,

1980) [hereinafter Statement on Unfairness], https://www.ftc.gov/legal-library/browse/ftc-policy-statement-

unfairness; but see FTC v. Accusearch, Inc., No. 06-CV-105-D, 2007 WL 4356786, at *18 (D. Wyo. Sept. 28, 2007)

(finding emotional harms caused by stalkers acquiring victims’ phone records created substantial injury because

injuries were neither trivial nor speculative), aff’d, 570 F.3d 1187 (10th Cir. 2009).

163

. Unfairness Authority, supra note 160; FTC v. Neovi, Inc., 604 F.3d 1150, 1157 (9th Cir. 2010).

164

. Statement on Unfairness, supra note 162; see Am. Fin. Servs. Ass’n v. FTC, 767 F.2d 957, 976 (D.C. Cir.

1985) (finding reasonable avoidance requirement follows “Commission’s general reliance on free and informed

consumer choice as the best regulator of the market”).

165

. See Statement on Unfairness, supra note 162 (“[W]e expect the marketplace to be self-correcting . . . .

We anticipate that consumers will survey the available alternatives, choose those that are most desirable, and

avoid those that are inadequate or unsatisfactory.”).

166

. Id.

167

. See public statement entitled “The ABCs at the FTC: Marketing and Advertising to Children” from

Roscoe B. Starek, III, Former Commissioner, FTC (July 25, 1997) (“Children tend to imitate other children and

they often lack the ability to foresee and avoid dangers.”), https://www.ftc.gov/news-

events/news/speeches/abcs-ftc-marketing-advertising-children.

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Third, to determine the countervailing benefits of the practice to consumers or

competition, courts consider both the current benefit of the practice and the

burden that would be imposed by a remedy.

168

Examples of burdens that might be

considered include “increased paperwork, increased regulatory burdens on the

flow of information, [and] reduced incentives to innovation and capital

formation.”

169

Finally, public policy considerations must ground a claim of substantial injury.

170

“An act or practice that causes substantial injury but lacks . . . grounding [in statutes,

judicial decisions, or the Constitution] is not unfair within Section 5(a)’s

meaning.”

171

Loot boxes are unfair because they encourage harmful gambling behaviors that

cannot be reasonably avoided or outweighed by commercial benefits. First, loot

boxes create substantial consumer injury by creating unhealthy spending habits,

excessive spending, depression, higher school dropout rates, and thoughts of

suicide in adolescents and adults alike.

172

Although courts presume emotional

harms are insufficient to be considered a substantial injury, the depression and

suicidal thoughts faced by loot box addicted consumers may be enough to

overcome the presumption.

173

Regardless, the excessive, gambling-like spending

exhibited by some players

174

satisfies a substantial injury because it concentrates

significant financial harm on a small number of consumers.

Loot boxes cannot be reasonably avoided because they often “withhold . . .

critical . . . performance data”

175

—the probability of receiving a particular

reward.

176

Because loot boxes are purchased by significant numbers of adolescents,

reasonable avoidance will be viewed from the perspective of an adolescent.

177

consumer cannot comparison shop between video game loot boxes because the

consumer has little to no idea how likely she is to receive a reward. Adolescents are

also unable to reasonably avoid loot boxes because they “exercise undue

168

. Unfairness Authority, supra note 160.

169

. Statement on Unfairness, supra note 162; see FTC v. Neovi, Inc., 604 F.3d 1150, 1158–59 (9th Cir. 2010)

(finding email check service had no benefits to consumers or competition because competitors offered the

same service in a more secure, convenient, and cheap manner).

170

. LabMD, Inc. v. FTC, 894 F.3d 1221, 1229 (11th Cir. 2018).

171

. Id.

172

. See discussion supra Section II.B.

173

. See supra note 162.

174

. See supra notes 131–37 and accompanying text.

175

. Statement on Unfairness, supra note 162.

176

. See discussion supra Section II.A.i.

177

. See supra note 167 and accompanying text.

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influence”

178

over children, who are easily goaded by dark patterns into purchasing

them.

179

The countervailing benefits consumers receive under current loot box practices

may include lower prices on video game purchases, while the benefits for video

game developers include large profits

180

and the ability to self-regulate.

181

If loot

boxes were regulated, harms could include an increased cost in video games, less

money for developers to produce high quality games,

182

and a chilling effect on

innovative microtransactions that some consumers may enjoy or benefit from.

Thus, the countervailing considerations provide some support for leaving the loot

box industry alone.

Several public policy considerations,

183

however, provide a foundation from

which to find loot boxes unfair. First, courts have found claims of unfairness are

grounded in the common law tort of negligence;

184

thus, the FTC can argue video

game developers negligently fail to design loot boxes that are understandable to a

reasonable consumer. Second, the FTC has a statutory mandate to protect children

online through the Children’s Online Privacy Protection Act.

185

Finally, caselaw

shows courts have an interest in protecting children and parents from unwanted

video game charges,

186

and such charges could come from loot boxes. Thus, the

common law, statutes, and caselaw suggest a public policy foundation in protecting

children from unwanted online purchases resulting from negligent user interfaces,

and this foundation likely outweighs any burdens businesses or consumers would

face by the regulation of loot boxes. Therefore, the FTC would likely be able to find

loot boxes unfair.

178

. Statement on Unfairness, supra note 162.

179

. See supra text accompanying notes 118–20.

180

. See supra text accompanying notes 11–12.

181

. See FED. TRADE COMM’N, VIDEO GAME LOOT BOX WORKSHOP 6 (2020) (describing workshop panelists

expressing support for the adaptability and flexibility of self-regulation compared to potentially “poorly crafted”

government regulation).

182

. See Renee Gittins, Executive Director, International Game Developers Association, Remarks at the

FTC’s Video Game Loot Box Workshop 71:8–72:23 (describing how loot boxes cover game development costs,

stagnating game prices, and larger numbers of employees, and how regulation would cause small developers

to “suffer” from implementation costs),

https://www.ftc.gov/system/files/documents/public_events/1511966/loot_boxes_workshop_transcript.pdf.

183

. See supra text accompanying notes 170–71.

184

. See LabMD, Inc. v. FTC, 894 F.3d 1221, 1231 (11th Cir. 2018) (finding company’s practices unfair

because they were grounded in a “negligent failure to design and maintain a reasonable data-security

program”).

185

. 15 U.S.C. §§ 6501–06.

186

. See FTC v. Amazon.com, Inc., No. C14-1038-JCC, 2016 WL 10654030, at *1, *9–10 (W.D. Wash. July 22,

2016) (finding children and parents could not reasonably avoid in-app purchases—including purchases on

mobile games—when the apps were listed as free, and the in-app purchases disclosure was listed at the bottom

of the page in a dense paragraph).

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2. Loot Boxes are Deceptive

Loot boxes are deceptive because the way in which they disclose probabilities and

use dark patterns is materially misleading. An act or practice is deceptive if it is

misleading to a reasonable consumer and is material to the consumer’s decision in

a transaction.

187

Thus, a deceptive practices claim contains three elements: a

misleading act or practice, the reasonable consumer standard, and materiality.

188

First, a misleading act or practice is established where “a representation,

omission or practice . . . is likely to mislead the consumer.”

189

Courts find a practice

is misleading based on the overall “net impression” the practice creates, even if

“the solicitation also contains truthful disclosures.”

190

Additionally, a claim need

only show a practice is likely to mislead; a showing of actual deception is not

required.

191

Second, the potentially misleading practice in question is viewed from the

perspective of a reasonable consumer under the circumstances.

192

The element is

satisfied if the consumer’s interpretation of the practice as misleading is

reasonable.

193

“When representations or sales practices are targeted to a specific

audience, such as children . . . the Commission determines the effect of the practice

on a reasonable member of that group.”

194

Third, the misleading practice must be material such that it “is one which is likely

to affect a consumer’s choice of or conduct regarding a product.”

195

A misleading

practice is likely to affect a consumer’s choice if it significantly involves the health

of the consumer or the safety or cost of the product.

196

The FTC has recently found practices that use dark patterns are deceptive.

197

has broadly categorized dark patterns into, in part, practices that induce false

beliefs, hide material information, or lead to unauthorized charges.

198

The agency

187

. Statement on Deception, supra note 24, at 1.

188

. Id.

189

. Id.

190

. FTC v. Cyberspace.com, LLC, 453 F.3d 1196, 1200 (9th Cir. 2006).

191

. See Trans World Accts., Inc. v. FTC, 594 F.2d 212, 214 (9th Cir. 1979) (Section 5 requires only a

“tendency” to deceive).

192

. Statement on Deception, supra note 24, at 2.

193

. Id.

194

. Id. at 3; see also Heinz W. Kirchner, 63 F.T.C. 1282, 1290 (1963) (“If, however, advertising is aimed at a

specially susceptible group of people (e.g., children), its truthfulness must be measured by the impact it will

make on them, not others to whom it is not primarily directed.”).

195

. Statement on Deception, supra note 24, at 5.

196

. Id.

197

. See generally FED. TRADE COMM’N, supra note 93 (discussing the FTC’s stance and recent actions on dark

patterns).

198

. Id. at 4, 7, 10.

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has also explicitly identified intermediate currency, confirmshaming, urgency, and

grinding as notable dark patterns.

199

Loot boxes present several deceptive practices. Because many loot box

purchasers are adolescents and younger children,

200

the practices will be viewed

from the perspective of a reasonable adolescent video game player.

First, the misleading representations presented by loot boxes include probability

disclosures—or a lack thereof—and dark patterns.

201

A video game that offers no

disclosure as to the probability of receiving its loot boxes would be likely to mislead

adolescent consumers because, after factoring in the dark patterns that attempt to

induce players to purchase loot boxes,

202

the consumer would receive the

inaccurate impression that the likelihood of receiving a valuable reward is fairly

high. A video game that does offer a disclosure may still be misleading because loot

boxes often have fluctuating probabilities.

203

Thus, providing a static probability

would mislead the consumer into believing her probability of receiving a reward

never changes. Further, even if a probability disclosure displays a fluctuating

probability, consumers may never see the disclosure because many developers

attempt to hide loot box probabilities by only presenting them on their website.

204

Second, a loot box’s misleading representations are material. Each of the

misleading practices related to probability disclosure is material because, as with

any game of chance, the likelihood of winning a valuable reward has a significant

impact on a consumer’s decision to purchase a loot box. Additionally, misleading

loot box practices are material because they involve the health of the consumer.

205

These practices involve the health of the consumer because they are likely to induce

an adolescent into unhealthy gambling behaviors.

206

Thus, the FTC may be able to

succeed on a deceptive practices claim because loot box probability disclosures are

likely to materially mislead consumers.

CONCLUSION

Video game loot boxes exist as a seemingly harmless and ever-changing source of

entertainment. However, loot boxes’ rapid ascendance as the prime source of profit

for video game developers, their confusing and alluring design, and their

detrimental effects on adult and adolescent players should compel the FTC to

199

. See id. at 21–25 (identifying intermediate currency, confirmshaming, urgency, and grinding as dark

patterns in the FTC’s “Compilation of Digital Dark Patterns”).

200

. See supra text accompanying notes 118–20.

201

. See discussion supra Sections II.A.i., II.A.ii.

202

. See supra notes 99–102, 109–16 and accompanying text.

203

. See supra notes 84–85 and accompanying text.

204

. See supra note 90 and accompanying text.

205

. See supra text accompanying note 196.

206

. See discussion supra Section II.B.

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consider loot boxes unfair and deceptive practices. The FTC’s adaptable Section 5

authority is the ideal method to protect countless players, and it may be the wake-

up call the video game industry needs to say game over to loot boxes.