Spain leads the race on regulating loot boxes in the EU

The Spanish government published last week the pre-draft bill of law on randomized reward mechanisms associated with interactive software products for entertainment (a subtle and technical way of referring to loot boxes in videogames). The Draft is now open to public consultation until 23 July and could set the standard for other EU countries which have been circling around this topic for the last five years.

From the very beginning, the Draft is focused on one area: videogames. In the videogaming sector, the recent development of loot boxes (included in the broader concept of randomized reward mechanisms) connects with the online gambling activities. That is, gaming is again face to face against gambling. In particular, loot boxes are compared to e-slot machines, hiding dynamics such as “near miss” or “losses disguised as winnings” which give rise to more traditional gambling problems.

The Draft starts by reaffirming the three general elements of gambling regulated in Spain at the national level under Law 13/2011: payment of any kind to participate, form of randomness on the determination of the result, and prize transferred to winner (that may be convertible to legal currency). However, the text excludes the Draft’s provisions from the scope of Law 13/2011.

Things to be highlighted of the Draft:

  • Important definitions under the Draft:

    • Random reward mechanism: Functionality associated with interactive entertainment software products that requires, for the activation of the random process in which all or most of its operation consists, the prior payment of an amount of money or of a virtual object that could have been acquired with money directly or indirectly, and that offers the user, as a result of said random process, the obtaining of a virtual object that can be, alternatively or cumulatively: (i) assigned or exchanged among the participants of an interactive entertainment software product; or (ii) exchanged for money or for other virtual objects used in that interactive software product, regardless of their type.

    • Interactive entertainment software product: Video games available to users on consoles, personal computers, mobile phones or any other device that may be used through electronic, computer, telematic or interactive channels.

  • Subject matter: To regulate random reward mechanisms whose access or activation is made through electronic, computerized, telematic and interactive channels, at the national level, in order to guarantee the prevention of addictive behaviours, protect the rights of minors, and safeguard the rights of participants in these activities.

  • Scope: Random reward mechanisms offered to residents in Spain (including marketing communications).

  • Main obligations & prohibitions:

    • Minors are prohibited from accessing random reward mechanisms. Providers must put in place an age gating system (documentary, although it may be complemented with a biometric system), as well as parental controls. Prior identification becomes a  prerequisite to access the random reward mechanism.

    • Commercial communications of random reward mechanisms, apart from general restrictions to banned content (marking promoting humiliating behaviors, discriminatory, etc.), must provide wording on moderating gaming and reminding that minors are not allowed. Additional restrictions are provided depending on the advertising channel (e.g., but not only, on TV such advertising must only be carried out between 1:00 -5:00 am in the morning). Advertisements through face to face media (e.g. billboards) are prohibited.

    • Reinforced information duties are required on random reward mechanism ,specifically, but not limited to, probabilities of winning, conditions to participate in the random reward mechanism, and information for a safer use (including parental controls, minors’ prohibition, etc.).

    • Providers of random reward mechanism must provide for self-exclusion mechanisms (as indicated therein) and session parameters before accessing the game, as well as offer users the possibility of capping the expenses.

  • Sanctions and infringements: The Draft provides the traditional list of infringements divided into “very severe,” “severe,” and “minor.” Sanctions for most severe infringements include fines between EUR 200,000 and 3,000,000, and the possibility of the authority suspending the service.

  • Others: Registered operators providing gambling activities under Law 13/2011 cannot provide random reward mechanisms.

The Draft establishes a 12-month period of transition to allow companies to comply, and is initially envisaged to enter into force in 2024.

Now is the time to follow up the development of the Draft, to see how other EU authorities react to it, and to file any comments on the Draft with the Authority, as the deadline for doing so is 23 July 2022!

 

Authored by Santiago de Ampuero and Clara Lázaro.

Contacts
Gonzalo F. Gallego
Partner
Madrid
Santiago de Ampuero
Senior Associate
Madrid
Clara Lazaro
Junior Associate
Madrid

 

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