Loot Boxes

Lord Kamall Excerpts

Thursday 13th October 2022 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Digital, Culture, Media and Sport (Lord Kamall) (Con)]

My Lords, I begin by thanking the noble Lord, Lord Foster, for bringing this important debate to the House today, all noble Lords who have spoken and those noble Lords who took the opportunity to welcome me to my new role. I am grateful and I look forward to working with noble Lords. I am sure that those noble Lords who worked with me in my previous job will recognise that I have always been open to meetings with officials to probe further than can be done within the confines of this Chamber.

In May this year, my ministerial predecessor, my noble friend Lord Parkinson of Whitley Bay, to whom I pay tribute for his work while he was on the Front Bench, responded to an Oral Question from the noble Lord, Lord Foster, about loot boxes. Since then, in July, we published the government response to the call for evidence and this debate therefore provides a useful and timely opportunity to discuss the findings and the next steps set out in the response in more detail. As I said, I will be happy to have more meetings with noble Lords on these issues and I welcome the continued scrutiny and engagement of this House on this.

Like other noble Lords who spoke, the Government are proud of the UK’s world-class video games sector and are committed to its continued growth. We introduced the video games tax relief in 2014 and have strengthened the UK’s reputation as a leading destination for developing games. In fact, as one noble Lord said, it has become so well known, you can now win Academy Awards for it. In addition, through the UK Games Fund, the Government are providing more than £8 million over this period to support the development of new games businesses and talent across the UK. But that comes with a large “however” or “but”. The scale and reach of the video games sector bring with them a responsibility to ensure high standards for protecting players. The Government are committed to ensuring that the UK is one of the safest places to be online, and this includes video games. We want all players, whether young people and children or vulnerable people, whatever their age, to have the tools and information they need to enjoy games safely.

In response to the debate today, I will set out some of our findings from the call for evidence—a number of noble Lords have already referred to these—and the steps we are taking. To begin, it was very helpful of the noble Lord, Lord Butler, to give a definition of loot boxes, but it was only half a definition, so I will continue by saying that the distinguishing feature of loot boxes is the random reward mechanism that allocates apparently randomised items to each purchase. Players do not know what they will get before opening the loot box. There are a variety of ways in which loot boxes are implemented, designed and used within games, including rewards that help players to compete in games, and cosmetic rewards, such as new skins, for example.

In response to growing concerns, including in this House and from players and parents, the Government ran a call for evidence, which was open for public submissions from September to November 2020. We received 32,000 responses from members of the public and 50 submissions from academics, the games industry and other organisations and individuals. This includes Peers for Gambling Reform and the All-Party Parliamentary Group for Gambling Related Harm. Many noble Lords paid tribute to the noble Lord, Lord Foster, for his leadership of that group. In addition, the Government commissioned an independent evidence assessment of academic literature on loot boxes, and I am grateful to noble Lords for referring to that today. Throughout this process, we are continuing to engage with the games industry, academics and other organisations and to press the industry in these forums on improving protection for players.

We published our response in July this year, and I recognise it has been a lengthy process but there were 32,000 submissions and 50 larger submissions. It is important that we consider these complex issues properly. But let me be quite clear: we agree that just because something is complex does not mean that you do nothing about it. It means you dive deeper into those issues and look at the links. As a former academic who sometimes wrote papers or had to assess papers for their use as evidence, I have been very careful to make sure that the conclusion comes from the evidence, rather than having an intended bias, before writing the paper. We have taken account of a huge number of submissions and I again thank all organisations and individuals who responded to that call.

The evidence identified a range of potential harms associated with loot boxes. This includes harms associated with gambling, as well as other potential mental health, financial and problem gaming-related harms. It suggests that the risk of harm is likely to be higher for children and younger people; we can agree on that. While the evidence base is still emerging, one of the more thoroughly explored harms from loot boxes is the nature of any possible association with gambling-related harm. A number of noble Lords asked about the nature of that association. The 15 peer-reviewed empirical studies considered by the InGAME evidence assessment found a stable and consistent association between loot box use and problem gambling. However, the research identified a range of plausible explanations that could underpin this association between loot boxes and problem gambling, and has not established a causal relationship, as noble Lords said. Some noble Lords challenged that, but I want to explore the other potential explanations.

Explanations include the fact that loot box purchasers are already heavily engaged in a range of gambling activities; that other factors, such as impulsivity, drive this association; that loot box purchases exhibit maladaptive motives, creating uncertainty for their users; or that loot box purchase itself leads to gambling-related harms. We have to consider all these possibilities in the ongoing academic debate. For example, a third factor, such as impulsivity, may underpin higher engagement in both gambling and loot boxes. So, evidence emerged of a number of other harms in our call for evidence, including financial harms, mental health harms and a possible relationship with problem gaming behaviours. The other thing that should be remembered when we look at a definition is that it is possible to purchase loot boxes in games without paying any real-world money at all. That is something we have to be quite clear about: how do we treat those players?

In addition to harms, the call for evidence considered the voluntary and statutory protections that have been introduced. Games companies have introduced a number of measures, including those that noble Lords referred to today. In response to the call for evidence, the Government’s view is that purchases of loot boxes should be unavailable to all children and young people unless and until they are enabled by a parent or guardian—it is not enough to say that; we are engaging with industry in various working groups to make it a reality—and that all players should have access to, and be aware of, spending controls and transparent information to support safe and responsible gaming; and that better evidence and research, enabled by improved access to data, should be developed to inform future policy-making.

A number of issues came up in the debate, and it is really important that we engage with them. I do not have the exact answers here now, so I am very happy to write to noble Lords and to allow them to ask my policy officials their questions in further detail. For example, the noble Lord, Lord McInnes, talked about younger gamers buying loot boxes without parental knowledge. That is undoubtedly a problem. We have seen that even a 10 year-old kid can be much more tech-savvy than their parents and can run rings around them when it comes to these issues. I will look into that to see if I can come back with an answer, but I hope that noble Lords will also be able to ask those questions directly when I arrange meetings on request.

We have made some progress on industry-led protections, but it has been uneven. We have been quite clear about this, and we know that more should be done by games companies and platforms. However, rather than imposing a solution, we want to work with the industry to ask how it will tackle this problem, given its creativity, innovation and technical experience, and how it will deliver tangible progress in the near future.

Once again, we want parents to be able to make informed choices. We welcome the fact that some platforms require parental authorisation for spending by under-18s within games, and we are calling on those who have not yet introduced such measures to introduce them and to ensure that loot boxes are not purchased without informed parental permission. We have to do more work on that. For all players, our view is that harm minimisation and player safety should be embedded into game design, and that is why we want to work with the industry to make sure that it embeds these measures into the games, rather than saying, “You must do this.” We expect games companies and platforms to provide further information to players and to look at that minority of players who spend a disproportionately large amount of money on loot boxes, whether or not they have parental allowance or permission, who may be at a greater risk of harm.

To deliver on these objectives, we have brought together a technical working group, as noble Lords said, which includes game industry trade bodies, platforms, publishers and developers. The group engages with academics and consumer and third sector groups to ensure that solutions are workable for parents and players. It has met several times already and has heard directly from a number of academics, including—as the noble Lord, Lord Foster, referred to—David Zendle, who has also attended the loot box technical working group. The DCMS chief scientific adviser, Professor Tom Rodden, has also visited the University of York and met David Zendle’s team, so there is ongoing interaction. The working group has met several times already, and it is actually meeting again today to discuss in detail how the objectives set out in the government response can be delivered. That is what the focus of the group’s discussion today will be. We want the group to facilitate the development of industry-led best practice guidance on the use of loot boxes, which should support players and parents across all platforms, from PC to mobile games.

We will also provide an update on industry-led measures by the first quarter of 2023, which I am sure will be of interest to noble Lords, but let me be quite clear: the Government expect action. The industry should be aware that the Government will not hesitate to consider legislative options if we deem it necessary—if these working groups do not deliver the action that noble Lords are calling for today. We are also working collaboratively on the video games research framework, and we hope to publish that by the end of the year. Its purpose is to facilitate better evidence and research but also to enable better access to data to support that evidence.

In addition to setting out why we believe action is needed, the government response considers the case for making changes to statutory consumer protections for users of loot boxes. I understand the views, including those raised by many noble Lords today, that the Government should go further, particularly with regard to the Gambling Act. The Government’s response to the call for evidence has been developed alongside our review of the Gambling Act, and the crossovers between gaming and gambling have been carefully considered. For noble Lords who asked about the delayed White Paper, we expect it to be coming out in the coming weeks—the noble Lord, Lord Foster, can chalk that up as a victory.

I want to be absolutely clear that the Government share strongly the views expressed today, but we do not intend to amend the scope of gambling regulation. Regulating loot boxes as gambling is only one potential means of mitigating the risks. Noble Lords may ask why, so let me go into some detail. First, while many loot boxes share some similarities with traditional gambling products, the Government view the ability to legitimately cash out rewards as an important distinction. In addition, entering the game without real money is not gambling real money, so we have to be very careful about that. The Gambling Commission has shown that it will take action when there has been unlicensed gambling within games, and noble Lords will be aware of the prosecution of FutGalaxy in 2017, which shows that action will be taken.

Secondly, changing the Gambling Act with regards to loot boxes would have some unintended consequences. It would require substantial changes to the gambling tax system, which is not designed to calculate duties owed on gambling transactions where the component parts have no clear monetary value—loot boxes have user-defined value in games, but they do not have a clear monetary value. Regulating loot boxes as gambling would also increase the scope and costs of running the Gambling Commission at a time when we are giving it more challenges by updating gambling regulation to bring it into the modern age—as I mentioned, the White Paper will be out soon. There is also the risk of other unintended consequences or activities. In my former career as an academic and researcher, I did quite a lot of work on unintended consequences, and we have to be quite clear about this.

However, in not taking forward changes to the Gambling Act, we believe that the statutory consumer protection obligations will continue to be the relevant regulatory framework. How do we make sure that those obligations are used in a proper way to tackle this issue? That work is being progressed through the DCMS-convened technical working group and will lead to further improvements. So we believe that it is premature to pursue legislative options at the moment, but we have said to the industry at these working groups that we will not hesitate to use that option if not enough is done. With the industry’s creativity, we are looking for it to come back to us with solutions it can design into a game, rather than being bolted on, to make it as integrated as possible.

I will quickly address some of the issues raised. Even though the gambling White Paper has not been published yet, we have already taken some action. We have banned gambling on credit cards, tightened restrictions on VIP schemes, strengthened the rules on how online operators identify those at risk of harm, and updated the gambling advertising codes. That shows all the things that can be done, and more can be done before passing legislation.

A number of noble Lords referred to other countries. We are looking at the evidence from Belgium and the Netherlands, but there are some issues here. For example, there are protracted legal proceedings going on in the Netherlands over how gambling laws should apply to certain loot boxes, and we want to see the outcome of those before looking at the option here. In addition, research in Belgium suggested that there is still loot box content in mobile games, despite the Belgian regulator’s decision to consider loot boxes as a form of gambling. So, once again, these countries have done something, but has it been effective enough? We need to look at the evidence of what has worked in other countries, rather than just what has been done there.

In conclusion, there are some other questions I have not answered, and I will make sure I write to noble Lords to deal with these issues. We all share the same objective, but we may think that there are different ways to achieve it. We are working closely with industry, academics and others to bring them together to find those solutions, but we also have the threat of potential legislation if the gaming industry and others do not come forward with appropriate protections. I am sure that the industry has heard loudly and clearly from noble Lords in this debate today, even though they may well be in a working group. It is quite clear that there is a strong feeling that something must be done. We want to do it with the industry, in co-operation, but I also understand and welcome pressure from noble Lords on the industry to make sure that we deliver on this.

In that light, before I sit down, I once again repeat my invitation to have meetings with noble Lords with the appropriate officials, to allow them not only to press my officials on that but to make us aware of things we may not have considered. We think we have considered everything, but we are very happy to consider all the evidence. With that, I once again thank the noble Lord, Lord Foster, for securing this debate, and I look forward to working constructively with him and other noble Lords in the future.