On May 21, a bill was introduced in the US Senate. This bill, dubbed The Protecting Children from Abusive Games Act, is a misguided attempt to regulate loot boxes and pay-to-win mechanics out of the video game industry.
To be clear: I am not necessarily against regulation on loot boxes. I do think that there are some loot boxes and some games industry practices that are unethical, and probably already borderline illegal. But, I think this bill is the wrong answer.
The bill's proponent has been kind enough to offer us an FAQ sheet (PDF). I'm going to answer the same questions his office has here, with less of a pro-passage bias.
To start, the FAQ states the purpose of the legislation: "to eliminate exploitative monetization practices from video games played by children." This is a really important thing, and we will come back to it later. But, for now, note the phrasing. It does not say to eliminate the exploitation of children in video games. It says eliminate the practices from games played by children. This distinction is relevant.
Which games would be covered?
Basically all video games.
That is not an exaggeration. The Senator's FAQ says that it prohibits "pay-to-win" and loot boxes in "minor-oriented games" and "games for general audiences" where the developers or distributors have "constructive knowledge" that "some" users are under 18.
In reality, the bill makes it "unlawful... to publish" and "unlawful... to distribute" games with loot boxes or pay-to-win purchases that are minor-oriented games or games for general audiences with constructive knowledge minors use them. This is an important distinction. The way the FAQ phrases this, you might assume that no one could include these mechanics going forward. But, because of the definition of "digital game distributor" and the prohibition on distribution, this would actually affect any game that meets the definition of "minor-oriented games", which is very broad, and all "constructive knowledge" situations. Even those that are already released.
Rather than try to explain how broad these definitions are, I thought I would just pull them from the bill itself. They are pasted here, with my comments in bold.
MINOR-ORIENTED GAME.—The term ‘‘minor-oriented video game’’ means an interactive digital entertainment product for which the target audience is individuals under the age of 18, as may be demonstrated by—
(A) the subject matter of the product; To a lot of people, "video games" generally appeal to kids. If this is a reasonable interpretation, the rest of the categories don't even matter much, all games are included
(B) the visual content of the product;
(C) the music or audio content of the product;
(D) the use of animated characters or activities that appeal to individuals under the age of 18; The phrasing in this is bad. Does this mean any animated character? Or animated characters that appeal to individuals under 18? If it means any animated character, then aren't all (other than recorded video) characters in games animated?
(E) the age of the characters or models in the product; Does this mean a game like Last of Us, which features a 14 year old primary character, would be covered? Even despite the clear ESRB "M" rating?
(F) the presence in the product of— (i) celebrities who are under the age of 18; or (ii) celebrities who appeal to individuals under the age of 18; Isn't the nature of "celebrity" that most celebrities appeal to broad swaths of people, including those under 18? I guess this means all sports games are covered.
(G) the language used in the product; It is unclear to me what language would be more juvenile. I guess baby-talk is right out if you want to include loot boxes. But, maybe including f*** and sh** a bunch would move the game more into a safe category?
(H) the content of materials used to advertise the product and the platforms on which such materials appear;
(I) the content of any advertising materials that appear in the product;
(J) other reliable empirical evidence relating to— (i) the composition of the audience of the product; or (ii) the audience of the product, as intended by the publisher or distributor of the product; or
(K) other evidence demonstrating that the product is targeted at individuals under the age of 18."
And the definition of "Constructive Knowledge"
Definition not found."
That's right, there is none. Instead the bill simply says that if a publisher or a distributor includes loot boxes or pay-to-win micro-transactions and "has constructive knowledge that any of its users are under the age of 18." Note that constructive knowledge is not actual knowledge. Generally, to lawyers, it would mean that they knew or should have known. So, if a publisher or distributor should have known that a single user of a game was under 18, and that game contained loot boxes or prohibited micro-transactions, they would be liable for penalties.
How will developers know which games can include pay-to-win or loot boxes? These sound like very broad categories that would include some of the most popular games on the market.
Note this is the actual phrase of the FAQ put out by the proponent of the bill. The proponent does not gloss over this impression. The bill does impact broad categories of games and some of the most popular games on the market. Here is part of the response: "The onus should be on developers to deter child consumption of products that foster gambling and similarly compulsive purchasing behavior, just as is true in other industries that restrict access to certain kinds of products and forms of entertainment to adult consumers."
Does this bill ban all downloadable content?
No. The FAQ response is also "no." But this question drastically misses the mark on what is important here. In fact, the bill doesn't really ban downloadable content. Instead, the question should be "does this bill ban more games than is needed to accomplish the goal of protecting kids from predatory monetization practices?" Phrased that way, the answer is almost certainly "yes." It bans huge swaths of games that include loot boxes or micro-transactions based on its very broad definitions of minor-oriented and pay-to-win and its constructive knowledge standard.
How are loot boxes defined?
Basically, loot boxes are defined accurately but also include tiered loot boxes inside of not-quite-loot-boxes.
How is pay-to-win defined?
Pay-to-win transactions, under the bill, include any that ease progression through content, assist in accomplishing a goal or receiving an award in the game or permits access to a game feature that was accessible to the user but no longer is (for example, by extending the amount of time to complete a level). It also includes anything that gives an advantage over other users in multiplayer games.
It specifically excludes cosmetic alterations with no competitive advantage. But, it is unclear if this would include where the cosmetic alteration is otherwise given as an achievement in the game. It is also unclear whether this kind of purchase is excluded because of a scientific difference in purchasing habits, or if it is simply because it does not "feel" bad to the proponent.
It also excludes DLC in the form of one-time purchases the "perceived value" of which is not otherwise defined as pay-to-win; this is pretty much a redundant definition that could have been kept out, in my mind.
Finally, it excludes the purchase of difficulty modes that increase the difficulty of the game. This is an interesting one. In my mind, as a person plays a good game, they want more of it. If the difficulty mode enhances the game in a way that makes it feel like more of the game (more monsters, harder puzzles, better rewards), it would seem this exception does not accomplish the stated purpose of avoiding exploitative monetization...
What about cosmetic downloadable content?
Excluded, see above. But the FAQ note: "The bill does commission a study of micro-transactions that includes a study of the potential of cosmetic downloadable content to induce compulsive purchasing behavior by children." In fact, it commissions a study on the effects of pay-to-win transactions and loot boxes, compliance with the bill and, as one small piece of the study, whether other forms of add-on transactions, including cosmetic DLC, induce compulsive purchasing by minors.
That is the end of the FAQ. From here, I pose some of my own questions and then attempt to answer them.
For video game developers, publishers and distributors, what would the punishment for noncompliance be if this passed?
It would be considered an unfair and deceptive trade practice. Penalties under the law cited by the bill are up to $10,000. The bill is careful to add that notwithstanding that cap, the penalty might be higher in the discretion of the court to "deter violations." And, while $10,000 might not seem like much, "each pay-to-win micro-transaction or loot box sold to a user who is under the age of 18" is a separate violation. The FTC and any state attorney general could bring a suit.
Does this really protect kids?
Unclear. The FTC was planning to study this issue, beginning with workshops and public comments in August, but perhaps now their action will be pre-empted by this.
Will it pass?
As with any bill, there is long process to become a law. This was introduced in the Senate into the Commerce Committee. Two of the bill's sponsors, the two Democrats, serve on that committee. Most of the Senators on that committee come from states without a big game development economy (with a few exceptions, including one of the sponsors). So, it may make it out of committee.
If passed, will the courts uphold the law?
This is a big question, and will be the subject of my next post on the Odin Law and Media blog.