The developer behind the popular video game Genshin Impact, Cognosphere Pte. Ltd., has agreed to a $20 million settlement with the Federal Trade Commission (FTC) following allegations that it violated children’s privacy laws and misled players about the real costs and odds of winning in-game loot boxes. As part of the settlement, the company will also implement measures to prevent children under the age of 16 from making in-game purchases without parental consent.
Allegations of Deceptive Practices
The FTC’s investigation into Genshin Impact centered around claims that the game’s developer used “dark-pattern” marketing techniques that deceived children, teens, and other players. These tactics allegedly led players to spend large sums of real money on in-game loot boxes with minimal chances of winning the most desirable prizes.
Samuel Levine, Director of the FTC’s Bureau of Consumer Protection, called the company’s practices “unfair” and noted that they specifically targeted younger audiences. “Genshin Impact deceived children, teens, and other players into spending hundreds of dollars on prizes they stood little chance of winning,” Levine said. “Companies that deploy these dark-pattern tactics will be held accountable if they deceive players, particularly kids and teens, about the true costs of in-game transactions.”
Violations of Children’s Privacy Laws
According to a complaint filed by the Department of Justice, the developer’s actions violated the Children’s Online Privacy Protection Rule (COPPA). The complaint accused Cognosphere of collecting personal information from children without the required parental consent, further compounding the deception. The company allegedly targeted children through the game’s colorful anime-style graphics and characters that resembled children themselves, as well as through promotional campaigns on social media platforms like YouTube, TikTok, and Twitch.
These social media influencer campaigns, which were particularly popular with younger audiences, glamorized the excitement of obtaining in-game loot boxes. The company allegedly gave players the false impression that they had better odds of winning rare five-star prizes than they actually did.
Complex and Misleading Virtual Currency System
The investigation also revealed that Genshin Impact used a complex virtual currency system to make it difficult for players to understand the true cost of purchasing loot boxes. Players had to exchange real money for virtual currency, which could then be used to open loot boxes. However, the system’s confusing exchange rates and denominations meant that many players, especially children, were unaware of how much they were spending on loot boxes. The complexity also led some players to spend far more than they realized in pursuit of coveted in-game prizes.
The loot boxes were marketed heavily through in-game “Event Banners,” which featured limited-time offers for five-star prizes. These event promotions, along with influencer endorsements, created a sense of urgency and excitement among players, pushing them to purchase more loot boxes despite the low odds of success.
Company’s Response and Settlement Terms
As part of the settlement, HoYoverse, the company behind Genshin Impact, will pay a $20 million fine to settle the allegations. In addition to the financial penalty, the company has agreed to block players under the age of 16 from making in-game purchases without obtaining parental consent. These steps are aimed at addressing concerns over the game’s potential to exploit younger players.
The settlement marks a significant moment in the ongoing debate over in-game monetization and the protection of children in the gaming industry. The FTC’s decision highlights the agency’s increasing scrutiny of the gaming sector and its efforts to ensure that companies are transparent about the costs and risks associated with in-game purchases, particularly those targeting vulnerable populations like children and teenagers.
The Future of Lootbox Regulations
This settlement signals a shift in how the gaming industry may approach loot boxes and other in-game purchases in the future. As games like Genshin Impact continue to grow in popularity, the pressure on developers to ensure fair and transparent marketing practices is likely to increase. In the coming years, further regulations could be enacted to protect consumers, particularly younger players, from misleading practices in the gaming world.
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