Spanish government publishes draft bill on 'loot boxes' and proposes prohibiting their use to minors

On 1 July 2022, the Ministry of Consumer Affairs of the Spanish Government published the draft of what will become the first law in the European Union to regulate loot boxes. 

A period of public consultation began with this publication, during which suggestions and impressions from legitimate rights and interest holders were heard. This finished on 23 July.

Emergence of loot boxes

The evolution of the video game industry in recent years has led to the emergence of new business models that increasingly resemble the products and services offered by the online gambling sector. 

In this context, randomly-generated in-game rewards, also known as loot boxes, have emerged. According to recent studies loot boxes are integrated in more than half of the top games available on mobile phones. In Spain, almost 30% of minors between 11 and 17 years old use these randomly-generated in-game rewards mechanisms.

Similarity to gambling products

Loot boxes are in-game virtual objects of any type that may be unlocked by users after paying a certain amount of money – either with official currency or digital assets – to receive a reward or random item to be used in the context of the videogame through exchange among players or redeeming them for money or other virtual objects. 

These rewards range from aesthetic elements for customising the player's avatar to weapons which may affect how the game experience unfolds. Their functioning and design share many characteristics with conventional gambling games (such as, for example, the commonly known slot machines), including the randomness of the reward, the payment of an amount, and even the visual and sound effects.

In light of this similarity, there is concern (which has been empirically proven), that loot boxes can lead to disorders already known in the gambling industry, such as thoughtless, compulsive or pathological consumer behaviour.

Additional protections

Despite the similarities existing between loot boxes and other online gambling games regulated in the Spanish Law 13/2011 on gambling, further regulation was desired.

The Spanish government considered that the rewards – their diversity and mutability, their convertibility from coins in legal tender, together with their complexity and their ancillary nature in the videogames in which they are integrated – deserved their own regulation. 

As a result, the Spanish government proposed this pioneering regulation. Its objective is to protect videogame players from being exposed to these addictive systems, particularly focusing on vulnerable groups such as minors and users showing risky gambling behaviours.

Proposed measures

Once the regulation passes the parliamentary process, it will apply to those random reward mechanisms whose access or activation is offered to Spanish residents, as well as to commercial communications to them. 

The main aspects regulated by the text of the draft bill are as follows:

Prohibition of use by minors

Access to these mechanisms or their activation shall be prohibited to minors and their use must be preceded by a system of documentary verification of identity in all cases, which may be complemented by biometric identification systems. In any case, the verification must comply with the applicable data protection regulations. Additionally, parental control systems must be enabled in order to allow the complete exclusion of loot boxes on any device.

Commercial communications

The proposed regulation prohibits advertising of these mechanisms from encouraging antisocial, violent, humiliating, denigrating or vexatious behaviours, which may lead to thoughtless or impulsive conduct regarding this activity, or mislead regarding the possibility of being rewarded. All communications must be accompanied by a message warning that participation in such activities should be in moderation and that their use by minors is prohibited. Advertising of loot boxes on physical means is prohibited and, in the case of commercial communications on audio-visual media, they may only be broadcast between 01:00 and 05:00 hours.

Right and duty of information

Users have the right to obtain clear and accurate information regarding, among other things, the conditions of participation, probability of obtaining the different virtual objects, the amount in euros to be paid for each activation, the number of random mechanisms activated and how to use loot boxes safely. The digital environments where loot boxes are offered are obliged to provide information about the risks derived from compulsive use, the existence of self-exclusion mechanisms or parental control systems, among other things.

Self-exclusion mechanisms

Companies exploiting or commercialising random reward mechanisms will have to enable self-exclusion mechanisms aimed at encouraging self-protection of participants. Through these mechanisms, users may temporarily suspend the activation of random reward mechanisms for a period of three months to five years, without the possibility of modifying this period once it has been set.

Spending limits and loot box sessions

Users should have the option to voluntarily set a spending limit on these virtual items, which cannot be changed until three months have elapsed since it was set. In addition, entities should oblige users to determine the maximum time and amount of money they are willing to spend in a session, so that they cannot access loot boxes if they do not set up each session.

Possible sanctions

Companies commercialising or exploiting these random reward systems that do not comply with this regulation will be subject to sanctions ranging from €25,000 to €3,000,000, depending on the severity of the infringement. It is contemplated that for very serious infringements, services offering loot boxes which have not complied with the regulation could be shut down.

Osborne Clarke comment

The videogame industry is one of the biggest and most powerful in the entertainment world, considered as a "niche market" which has traditionally escaped regulatory scrutiny by many authorities. However, with the publication of this draft bill, Spain is committed to regulating "dangerous" loot boxes and is making progress in adapting their regulation to the digital ecosystems which, until now, have managed to evade it, due to their unique and different form (as opposed to the more physical and conventional mechanisms). 

The draft bill has recently completed a public consultation phase, during which opinions and suggestions regarding the proposed text were heard. From then on, the Council of Ministers will process its approval and then the parliamentary process will take place with the aim of it coming into force on 2 January 2024.