In Counts II – V of the FTC’s complaint against HoYoverse and Genshin Impact, the FTC alleges that HoYoverse engaged in deceptive and unfair practices surrounding the actual cost and odds of its loot boxes and how those loot boxes are marketed. Importantly, this is the first complaint by the FTC against loot box mechanics and sheds light on how the FTC will handle future loot box compliance.

In Part III of this blog post series, we will examine how this complaint reveals important factors that the FTC will consider when determining if other loot box systems are deceptive or unfair.

Misrepresentation of the Cost of Loot Boxes

As mentioned above, although players can obtain some in-game currency through gameplay, several opt to spend in-game currency in order to obtain more characters. To do so, a player must go through multiple layers of currency conversions. First, a player must spend real currency to purchase bundles of 60, 300, 980, 1,980, 3,280, and 6,480 “Genesis Crystals.” Next, the player must convert the Genesis Crystals on a 1:1 ratio for “Primogens.” Then, the player must convert 160 Primogens for one wish token. Finally, players can exchange one wish token for one gacha roll. Beyond the confusing currency conversion rates, the game is aggressive in prompting the player to buy in-game currency. If a player attempts to roll the gacha and does not have enough currency, a pop-up screen will ask the player if they wish to top off on the relevant currency to have enough to purchase a gacha roll.

The FTC argues that the multiple layers of currency conversion, the unintuitive currency exchange rates and the aggressive prompting to purchase additional currency is confusing and misleading.

Misrepresentation of the Odds of Loot Box Rewards

There are two parts to the FTC’s claim that HoYoverse misrepresented the odds of obtaining specific loot box rewards. The first is that the system of loot box odds itself is overly confusing and misleading. The second is that the way that HoYoverse promotes the game misleads players about their chances of obtaining a specific loot box reward.

Genshin Impact’s gacha system, which is typical of many gacha games, has character “banners” and a “pity” system. Banners are limited time events where players can obtain banner-specific “five-star” characters by pulling on that specific banner. The chance of obtaining a five-star character from any single gacha pull is quite low – around 0.3%. To establish a floor of how much a player must spend to obtain a five-star character, HoYoverse implemented a “pity” system which guarantees at least one five-star character within ninety attempts.

However, when a player does finally obtain a five-star character, instead of immediately receiving the banner-specific five-star character, there is a 50% chance that they obtain a less desirable five-star character from a more widely available pool of characters instead. Only if a player fails to obtain the banner-specific five-star character within their first ninety attempts, are they then guaranteed to obtain the banner-specific character in their next ninety attempts. This means that a player may need to pull the banner-specific gacha as many as 180 times in order to obtain a specific character which could cost as much as $540.

The complaint argues that these multiple layers of probability are confusing and misleading to players. Furthermore, HoYoverse’s in-game description of the system doesn’t reveal this complicated system upfront. In marketing materials and banner descriptions, HoYoverse used sensationalized language. For example, they claimed that there was a “huge boost” to the chances of obtaining a banner-specific character and that players had a 50% chance of obtaining said banner-specific character. In reality, the huge boost was that players had a 0.3% to obtain a character that was normally not obtainable at all and the 50% chance referred to a player’s chance of obtaining the banner-specific character as opposed to a less desirable five-star character when they finally achieved the 0.3% to obtain a five-star character in the first place. The specific mechanics of the system are only explained on a sub-menu that players must separately access.

The FTC again cites HoYoverse’s use of influencer marketing activities. One specific example that the FTC cited was popular YouTuber SSSniperWolf’s promotional video for Genshin Impact. HoYoverse paid SSSniperWolf to make a video where she would pull on the gacha and promote the act as exciting and fun. However, the promotional video was misleadingly edited in a way to depict a fake and impossible scenario. The video depicted twelve pulls simultaneously. In the game, players could only pull on the gacha ten times simultaneously. Additionally, when SSSniperWolf obtained the featured five-star character, the character reveal screen was accompanied by a purple shooting star animation that typically accompanied less desirable four-star characters rather than the typical gold shooting star animation that accompanied five-star characters. This depicted the chance of obtaining a five-star character as being more likely and therefore less expensive than it actually was.

As seen here, the FTC will look at both the actual odds of obtaining specific prizes from a loot box and at how a game promotes and presents such loot boxes when determining whether a specific loot box system is deceptive or unfair.

Lessons on Loot Box Systems and Disclosures

Avoid Misleading Players through Complex Systems. The FTC argued that both the currency conversion system and the loot box winning odds were confusing and misleading. Central to both was the fact that there are multiple layers of currency conversions or odds that interact in unintuitive ways. Games should avoid such complex systems and present the actual odds and costs as upfront as it can whether this is through an intuitive conversion system such as 1:1 or even by displaying the real monetary cost of opening a loot box. Further, games should avoid using sensationalized language that could mislead about the actual cost or odds of winning specific loot box prizes.

Be Diligent about Reviewing Influencer Marketing. Online service providers must be diligent so that influencer marketing materials are accurate and not misleading. This includes not only the content of the influencer promotional materials but also how such promotional materials are edited or presented.

***

In this three-part blog post we examined both the familiar factors that the FTC will examine in determining COPPA applicability and the new factors that the FTC will examine in determining whether a loot box or gachapon system is unfair. Please don’t hesitate to reach out to us if you have questions about COPPA and loot box compliance for your game, website, or service.