The developer of the online game Genshin Impact agreed to pay $20 million to settle allegations of violating data privacy of children and duping players into spending money on in-game loot boxes.
The FTC alleged that the company was aware that children under 13 were using its service and “continued to collect personal information from children and use it without obtaining parental consent or complying with other COPPA requirements”
The company allegedly shared the collected user data and device identifiers with third-party analytics companies and advertisers, tracking game progress, settings, purchases, and friends’ lists, the FTC said.
In addition to COPPA violations, HoYoverse was also accused of deceiving players, including children, about the odds of winning a specific loot box as well as the amount it takes to open these boxes. Cognosphere Pte is owned by the Chinese company miHoYo, based in Shanghai.
A loot box is a mystery bundle of digital items to be used within a video game. A user has to buy loot boxes and only knows the exact contents after the purchase. Box contents are random and users typically hope to luck out and find something valuable.
Players collect virtual heroes, form teams, and use the powers of these characters to finish tasks. The most desirable are “five-star” heroes given their bigger powers. They “can only be obtained by opening loot boxes, which players can purchase using virtual currency.”
The in-game virtual currency system is confusing and “misleads consumers about the amount of money that players spend on loot boxes on an ongoing basis,” alleged the FTC. The company allegedly “unfairly marketed” loot boxes to players by obscuring their “real costs and misled all players about the odds of obtaining prizes.”
Samuel Levine, director of the FTC’s Bureau of Consumer Protection, accused Genshin Impact of having “deceived children, teens, and other players into spending hundreds of dollars on prizes they stood little chance of winning.”
“We agreed to this settlement because we value the trust of our community and share a commitment to transparency for our players,” they said.
“Under the agreement, we will introduce new age-gate and parental consent protections for children and young teens and increase our in-game disclosures around virtual currency and rewards for players in the U.S. in the coming months.”
In addition to the $20 million penalty, the settlement agreement prohibits the companies from allowing children under 16 to buy loot boxes without parental consent.
Players must have the option to buy loot boxes with real currency and not just the in-game virtual currency. Companies are also required to clearly disclose the odds of loot boxes.
As for the COPPA violation, the company is required to delete all personal information already collected from users under 13 unless parental consent for retaining the data is obtained.
The settlement must now be approved by a federal judge.
The company made the payment to settle allegations of COPPA violations as well as claims that Epic used design tricks to dupe users into making unintentional purchases.
