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General

Loot box regulation - Germany's KJM issues its decision


On 23 March 2018 the German Commission for the Protection of Youth in the Media (KJM) released its long awaited official position on loot boxes. The KJM is the head regulator for youth protection in online media in Germany (including video games, apps, social casino, etc.). Whilst the KJM’s statement is non-committal it outlines that loot boxes can, under certain circumstances, violate youth protection laws. The KJM is not responsible for regulating gambling. Thus, potential issues from a gambling law perspective are not addressed in its decision.

Developments on loot boxes in Germany so far

Since 2017 the global loot box controversy has caused several reactions by German regulators, politicians and other stakeholders. In October 2017 both, the German Age Rating Board (USK) and the Federal Review Board for Media Harmful to Minors (BPjM), released an official statement on the matter. The USK statement about loot boxes not constituting gambling garnered widespread global attention. In November 2017 loot boxes were discussed in the Bavarian Parliament and three emergency appeals were lodged to the Bavarian government to investigate the matter. Two of them were passed by parliament. One suggested that the Bavarian government should engage the KJM with the matter of loot boxes. Following the emergency appeals, the Bavarian State Ministry for Labor and Social Matters, Family and Integration (Ministry) asked the KJM to look into the matter of youth protection in online-games in light of the new phenomenon of loot boxes. During this investigation, on February 2, 2018, the KJM chairman gave an interview to a major German newspaper, stating that loot boxes might violate the prohibition on direct appeals to buy products directed towards minors. The interview attracted global attention and was often falsely reported as “Germany is about to ban loot boxes”. However, the KJM’s final decision on loot boxes was not to be released until March.

The KJM’s statement

In response to the Ministry’s request, the KJM published its official statement on 23 March 2018. The statement outlines that loot boxes can under certain circumstances violate the prohibition of direct advertisement appeals to buy products directed towards minors (Sec. 6 (2) No. 1 JMStV) and the requirement that advertisements directed towards minors may not harm the interests of minors or exploit their inexperience (Sec. 6 (4) JMStV). Whether this is the case is subject to a case-by-case decision and the exact terms of the loot box offer. However, the KJM also held that none of the games which were reported to it by the Ministry posed an issue, in particular because some of them were rated 16+ and therefore not explicitly directed at children. Other than that, the KJM did not go into much detail. It concludes with stating that although some of the investigated gaming apps directed towards children included loot boxes, none of them advertised the loot boxes with unlawful direct appeals. Furthermore, the KJM makes clear that until now no specific complaints about a potentially unlawful loot box presentation have reached it.

Analysis

The KJM’s statement is rather non-committal. The fact that the KJM points out that no complaints on specific loot box mechanisms have reached it so far, indicates that it does not intend to investigate the matter by itself any further without any external complaints. However, due to the ongoing heated loot box debate, such complaints are not unlikely (in particular after the KJM released its statement). This gives rise to the question under what circumstances the KJM will prohibit a specific loot box mechanism. 

Additionally, similar provisions as those subject to the KJM decision can be found in the German Law Against Unfair Competition. Thus, potential violations may well be subject to cease and desist claims by competitors and in particular consumer protection associations.

Detailed legal analysis in light of the KJM statement is available from us here.
 

Other Jurisdictions

Aside from youth protection laws, loot boxes touch in particular gambling laws, consumer laws and sometimes even financial laws (in case virtual currency is used for the purchase). Other jurisdictions with recent regulatory, political and legal developments in relation to loot boxes include the USA, UK, Belgium, China, Japan, the Netherlands, France, South Korea, New Zealand, Australia, Singapore, Isle of Man, Sweden, Norway and Denmark. 

Contributor: Sebastian Schwiddessen