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Class Action Suit against Apple in California for Allowing Loot Box Games on App Store

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A class-action suit against Apple has been filed in the US District Court of Northern California for the “predatory practice” of allowing loot boxes in its App Store.

“Through the games it sells and offers for free to consumers through its AppStore, Apple engages in predatory practices enticing consumers, including children to engage in gambling and similar addictive conduct in violation of this and other laws designed to protect consumers and to prohibit such practices," reads the filing.

The lawsuit claims that Apple is indulging in unlawful and unfair business practices, unfair and deceptive acts and practices, and unfair enrichment.

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Image: Apple Fifth Avenue

There is still no consensus among world regulatory bodies if the loot boxes can be covered under gambling. Though these boxes do involve an element of chance because players do not know what they will get, they are not covered by existing gambling legislation because the items “won” are not considered to have a monetary value.

Loot boxes are generally in-app purchases that come in the forms of rewards, costumes, skins, special items and powers. Some items are premium. Addicted gamers are ready to buy such premium items, through in-game currency or even money, raising the question of whether this qualifies as gambling.

The Digital, Culture, Media, and Sport (DCMS) Committee, operating in the UK, published an 84-page report on immersive and addictive technologies. They said there was a "lack of honesty and transparency" among social media and game company representatives.

In another panel meet organized by the Federal Trade Commission last year, York St John University researcher Dr David Zendle emphasized,

"There's one clear message that I want to get across today, and it stands in stark contrast to mostly everything you've heard so far. The message is this: Spending money on loot boxes is linked to problem gambling. The more money people spend on loot boxes, the more severe their problem gambling is. This isn't just my research. This is an effect that has been replicated numerous times across the world by multiple independent labs. This is something the games industry does not engage with.”

He also said that addiction and potential harm should not be trivialized or compared to collecting baseball cards.

Zendle said that his research had shown a link between problem gambling and loot boxes, he conceded that it's unclear what sort of causal relationship might exist.

In Apple’s case, the lawsuit’s validity rests on the definition of gambling outlined by the California Penal Code. It states that for any service or product to be considered as an illegal gambling device, it should have three features: it is a machine, aperture, or device; something of value is given to play; and the player may receive something of value by an element of chance.

The Penal Code extends the value to include, besides the usual bills, coins or tokens; ” free replays, additional playing time, redemption tickets, gift cards, game credits, or anything else with a value, monetary or otherwise."

"None of these elements can be in dispute," reads the filing. "A player uses his iPhone, iPad, or computer with the downloaded game on it (#1); The player pays real-world currency for the opportunity to open a Loot Box (#2), and the Loot Box is a randomized chance to obtain something valuable in-game.”

The lawsuit holds Apple responsible because it hosts games on its App Stores. The filing claims that because Apple owns and operates the platform, profits directly from in-app purchases of loot boxes, it is liable in this case.

The complaint says that over the years, Apple has profiteered through the sale of these apps. ”Over the last four years, Defendant's App Store games have brought in billions of dollars, even though the vast majority of the games are free to download."

Meanwhile, a Gambling Commission survey in 2018 found that 31% of children aged 11-16 had paid-for loot boxes. One gamer revealed that he was spending nearly £1,000 or $1234 a year on the Fifa game in the hopes of winning better players for his team.

Apple has an odds disclosure policy for developers that have loot boxes but it does not adhere to the Entertainment Software Rating Board (ESRB), which is an American self-regulatory organization that assigns age and content ratings to consumer video games for parental control and discretion. It is, therefore, not required to disclose the presence of loot boxes in any app prior to download through the store.

The debate over the classification of loot boxes as a gambling item has been long-drawn. There was a proposal to ban loot boxes in 2019 through a Senate bill named "Protecting Children From Abusive Games Act", though it is believed, it may fall by the wayside as there are not many takers for it.

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