CAP publishes guidance on advertising in-game purchases such as loot boxes

The question

How far does the CAP Code apply to the marketing of loot boxes and other in-game purchases in apps and video games?

The key takeaway 

Storefronts and inducements to purchase items within a game will be considered advertising if the virtual currency can only be obtained by purchasing it in a real-world transaction. On the other hand, if the virtual currency can be earned within the game, then it will be considered an in-game resource. In other words, any inducement to or presentation of purchase within a game (i.e. not tied to a real world transaction) would not be considered advertising, as the virtual currency would not be a direct substitution for real-world money.

The background

The Committee of Advertising Practice (CAP) has published new guidance in response to increasing concerns about the potential for in-game purchasing to cause harm and/or mislead consumers. Whilst the CAP and BCAP Codes already contains prohibitions on harmful and misleading advertising, CAP felt that new guidance was needed to cover how the Codes apply to the pricing and presentation of in-game purchases and the advertising of games that feature in-game purchasing. The clarity provided by the final guidance is particularly important given the growing debate and controversy surrounding loot boxes and gambling, and the increasing regulatory focus on loot boxes across Europe.

The development

One of the most useful aspects of the guidance is that it provides clarity on when advertising in-game purchases is likely to be covered by the Codes. There are several factors which may increase the likelihood of a storefront being within the scope of the Codes, namely:

• if virtual currency can only be obtained through direct real-world purchases
• if, as a result of a marketing agreement, there are branded or promotional items from third-party advertisers, or
• if the goods are linked to real-world promotional marketing activities or will hold tangible value outside the game.

The primary focus of the guidance in relation to pricing of in-game purchases is to address the potential for the use of virtual currencies to obscure the real-world price of items. The emphasis of the guidance on pricing is for advertisers to ensure that the cost of virtual currency for in-game users is clear and easily translatable into a real-world price. This includes where currency is “bundled”, discounted, or even affected by odd-pricing. The guidance no longer suggests that advertisers include real-world prices for items purchased with virtual currency. However, CAP has emphasised that advertisers still have responsibility to ensure that consumers have easy access to information which allows them to understand the real-world price of an in-game purchase. It has suggested that, as a minimum, the consumer should have access to information relating to the amount of virtual currency they currently hold and the cost of any further virtual currency necessary to complete the purchase. 

CAP has also included guidance on the presentation of in-game purchases. The guidance concentrates on reducing the risk of consumers being misled within a particular game context or because of time pressure and/or elements of chance. In relation to inducements mid-game, advertisers should be careful when presenting ads to avoid techniques which may put undue pressure on players, for example countdown timers or offering purchases of extra resources. If advertisers do use such techniques, they should “be prepared to justify them in relation to the game context”. Due to the element of chance with random item purchasing, the guidance suggests advertisers take care not to mislead consumers about the likelihood of receiving a rare item. For example, CAP states that it will likely be unacceptable to suggest that a player almost obtained a rare item or that the next purchase will result in a rare item. For time-limited offers, advertisers are reminded that they should not imply that the item or offer is only available for a specific period if it is likely to be made available again. 

Finally, the guidance also addresses the advertising of games which include in-game purchases. It should be made clear if a game includes in-game purchases and marketers are encouraged to provide further information about the type of in-game purchases involved. For example, whether the purchasing is purely functional or cosmetic, or limited to “big ticket” purchases. Moreover, a “careful balance” should be struck between giving an overview of the game and implying that items which require further purchases are included in the basic game. The guidance goes further to suggest that content which requires a significant investment of time (and/or purchases) should not be advertised as quickly obtainable through standard play.

Why is this important?

Following the rapid expansion of the gaming sector during Covid-19, and increasing regulatory and public scrutiny, the final guidance has provided further clarity and a helpful guide to navigating a complex and fast-moving area for those companies looking to capitalise on in-game purchases.

Any practical tips?

Companies should utilise the detail provided in the final guidance to conduct a review of their ads for in-game purchases. Businesses should generally be able to identify whether their advertisements are covered by the Codes, and if so, if they are being compliant. Moreover, companies should consider the advantages of restricting virtual currency to being earned within the game, as this will fall outside the scope of the Codes.

Winter 2021