Consumer advocates to ESRB, FTC: Loot box odds disclosure is not enough

Today, an FTC hearing on loot boxes in games concluded with a final session focused on consumer protection measures, in which multiple advocates maintained that while loot box odds disclosure is a good start, the industry needs to do more to temper the monetization mechanic.

The third panel at "Inside the Game: Unlocking the Consumer Issues Surrounding Loot Boxes" was entitled "A Level Playing Field - What's Fair Game?" and it opened with an overview of the ESRB's existing ratings system and parental guides delivered by ESRB president Patricia Vance. Her primary argument was that the issue with loot boxes as they stand now is a lack of knowledge, particularly from parents, on when they're included and how they work.

She then pointed toward current ESRB measures such as the "in-game purchases" label on physical games that contain microtransactions and a new push from all three major platform holders to require loot box odds disclosure as ways in which the industry is solving the awareness issue. 18% of all rating assignments for physical games, she said, now have the "in-game purchases" label.

That wasn't good enough for Consumer Reports' director of financial policy Anna Laitin. Her presentation came second, and centered on the argument that the goal of microtransactions in general, including loot boxes, is for people to purchase them, and that companies will use "subtle tactics" to manipulate players into buying more of them. Because of that, she said, simply letting consumers know that the purchases exist in a game isn't enough.

"There's a label for 'in-game purchases,' and that can mean a huge range of things. That's everything from, 'You can buy a new character when it's released,' to 'We have surprise loot boxes.' A whole, wide range. I know when I look at a game, there's a lot more detail that consumers need to understand how they might be presented with the option to spend money."

"There's a label for 'in-game purchases,' and that can mean a huge range of things"

Anna Laitin

She went on to talk about mobile games specifically, noting the ways games such as Clash of Clans obfuscate the amount that certain things cost by distancing the final items being purchased from the real money being spent. Specifically, she said ths is done by using varied pricing methods on in-game items, and then requiring users to first buy in-game currency at varying price tiers with real money, and then use that currency to buy items.

Laitin finally detailed what she referred to as "dark patterns," or ways that games urge players to do certain actions, such as purchase a loot box. Specifically, she mentioned appointment dynamics (building habits for playing regularly, such as log-in bonuses), pay-to-win mechanics (where making reasonable progress requires in-game purchases) and grinding ("making the alternative to buying a loot box doing a lot of relatively pointless work for a very long time"), noting that these are all design decisions surrounding in-game purchases and are not covered by a single label.

Next up was Keith S. Whyte, the executive director of the National Council on Problem Gambling (NCPG). He opened by noting the many similarities between loot boxes and gambling, specifically slot machines, saying that "whether or not loot boxes meet criteria for a gambling device in a particular jurisdiction, and whether or not players recognize or understand the risks, additional consumer protection features must be put in place to prevent users from developing gambling problems."

That protection, he said, was especially important for high-risk groups such as men, youth, and active military as well as veterans, all of whom statistically have higher risks of gambling addiction. Whyte noted that the issues go both ways, with problem gamblers being more inclined to make in-app purchases, as well as people who make in-app purchases potentially being more likely to take up gambling.

Whyte then suggested that while informing consumers about odds disclosure (as the ESRB is doing) is a good first step to solving these problems, that alone doesn't go far enough.

"If you're spending $250 million to develop a game and you've got some of the world's best and most creative talent, let's find a way to make information and disclosure entertaining, interactive, and exciting," he said. "Build it into gameplay. Reward players for doing pro-social behavior like finding out what the odds really are in this game. I would hate to see it look like what a paytable looks like for a slot machine, which is 2-point font, zillions of numbers, and without a degree in higher math you're utterly unable to understand this. There are ways to make this transparency quite effective, especially when you're trying to communicate with younger consumers or parents who are not technically well-equipped."

"Nobody in the gambling issue would ever trust a slot machine manufacturer to self-certify that their machines and the odds and randomness of their machines perform as they say"

Keith S. Whyte

Whyte also suggested upping the age-rating on many or most games with loot boxes to M (Mature) saying that many of the games that were most concerning were currently rated as T (Teen). "If you're a parent who's basing your parental controls on whatever the ESRB rating is," he said, "and the ESRB rating is artificially low, that might not trigger the appropriate level of parental control."

Additionally, Whyte went into the idea of certification programs and the need for third-party, objective regulation.

"Nobody in the gambling issue would ever trust a slot machine manufacturer to self-certify that their machines and the odds and randomness of their machines perform as they say. We use independent testing labs to verify that the odds are as stated. And they often find machines that don't perform adequately. It's an important consumer protection feature. So if the industry is going to provide us information on odds and randomness, take a lesson from the gambling side. You've got to get it done independently. It's not going to be effective if you're just saying, 'Trust us, these items drop at this rate.'"

Aside from informing consumers, Whyte mentioned that the next step is to help those who do slip through the cracks. The NCPG, he said, is launching a website called ResponsiblePlay.org to assist people who have issues with loot box issues and addiction. The site will include a questionaire of sorts that will help users identify first if they have problems with loot boxes, and then whether those problems fall into the realm of gambling addiction, gaming addiction, or internet addiction.

Tied to that, Whyte also recommends the gaming industry adopt self-exclusion programs to allow users who know they have issues to effectively block themselves from making purchases in games on a particular card or payment account. Though this places the initiative on the user to sign up for such a program, Whyte added that it also falls on those accepting payments to honor those programs, lest such programs be entirely ineffective.

Finally, Whyte called for developers and publishers to provide de-identified player data to independent, third-party researchers so they can examine issues related to loot boxes, come to accurate conclusions about their effects, and develop solutions.

Last to speak was Ariel Fox Johnson, senior counsel for policy and privacy at Common Sense Media. She began by focusing in on the issues with children playing games with microtransactions included, noting that especially young children are still learning to differentiate between play money and real money -- something that is made even more challenging when games obfuscate how much things really cost. Even when the transaction amount is clear, other factors such as the relative lack of friction to make such a purchase or the fact that the dollar amounts appear small ($0.99 purchases made many times as opposed to one very large purchase once) can confuse or trick children into spending more than they intend, or without thinking.

"Most people don't understand odds and randomness in the most simple dimensions, especially when you're talking about dynamic odds"

Keith S. Whyte

Johnson highlighted known tactics used by companies as well to get children to spend more money, such as using matchmaking to pair older players with younger players, who would then spend money to better compete with the older players. Or, in another example, having characters on-screen appear to be upset when children do not make an in-game purchase.

Like both Whyte and Laitin, Johnson brought up the fact that simply disclosing the existence of in-game transactions to parents isn't enough to protect children from making purchases or engaging in excessive spending. Prices, disclosure odds, and other key details about the nature of such purchases are almost always located within the game itself rather than on a disclosure label, and especially with mobile games, parents may not always realize that their credit card is directly linked to their account already (such as through Google Play) and can be used by children to make purchases without their authorization.

In the final Q&A, the panelists were more directly asked specifically about the efficacy of odds disclosure. Whyte opened the responses by saying that while disclosure certainly wouldn't hurt, it was "unlikely to be effective."

"Most people don't understand odds and randomness in the most simple dimensions, especially when you're talking about dynamic odds," he said. "It's almost impossible for people to figure that out. And you have to look at the people you're disclosing to. If it's a young person or someone who's vulnerable to gambling addiction, they're going to understand that information completely differently than a rational, well-informed, or non-addicted consumer.

"I think you have to trust that the industry is serious about making the commitment they announced this morning"

Patricia Vance

"From the gambling addiction space, there've been few studies that have found much impact of odds and randomness disclosure on slot machines. It doesn't hurt. It doesn't lead to negative perception, except in some ways, there are ways to talk about odds and randomness in gambling that can actually encourage or lead people into false beliefs. But by and large I think that information is okay. The next step is to find ways to make it sticky and entertaining for consumers, and to make such disclosures impactful...The disclosure itself is not the point. The point is for it to lead to something."

Laitin replied that she agreed with Whyte's point, adding, "I don't think a kid is going to make a significantly better decision with certain odds disclosures. While it's a good step, it can't be a step that replaces more meaningful change."

Whyte added, "Look at Powerball. Your odds are 246 million to one. Does that stop anybody from buying Powerball tickets? Some people love to chase long odds. That's part of the thrill. That's, frankly, part of the addiction for some people."

Johnson also spoke in agreement, saying that it also matters when the disclosure happens as well, and that while previous suggestions to make such disclosures "entertaining" were a good step, she posited that it may need to go deeper than that.

"The reality is, they want people to buy these. Is there a need to disclose in a way that creates some friction, slows people down, makes them think? That may, of course, stop them from playing the loot boxes. Which takes away revenue."

Finally, Vance weighed in on behalf of the ESRB.

"I think you have to trust that the industry is serious about making the commitment they announced this morning," she said. "They have their own customers to serve and they've made a commitment to make disclosures easy to access and be understandable. As we learned earlier this morning, loot boxes vary game-to-game, loot box-to-loot box. There is no one silver bullet for disclosures. There's no one standard. I think we have to leave it to individual game developers to develop the right type of disclosures for their game and their customers."