In a ground-breaking decision, the District Court of The Hague recently ruled that the Dutch Gaming Authority (DGA) was justified in imposing an administrative order with a penalty of up to EUR 5 million on Electronic Arts Inc. and Electronic Arts Swiss SARL for violating the Gambling Act through its "Packs" in a FIFA-themed video game.
In 2018, the DGA completed a study on loot boxes in games, which mix gambling and games of skill. Although the outcome of games is determined by skill, the outcome of loot boxes is determined by chance. The study revealed that four out of ten loot boxes that were studied contravened the law because the content of the loot boxes were determined by chance and the prizes to be won could be traded outside of the game and hence had a market value. By this definition, offering this type of gambling to Dutch consumers without a license is a violation of the Dutch Betting and Gaming Act.
As a result of the study, the DGA imposed a fine of up to EUR 5 million on Electronic Arts Inc. and Electronic Arts Swiss SARL (EA) in 2019. The DGA penalized EA because its popular FIFA football game contained illegal loot boxes, which are like treasure chests containing football players that could improve the performance of the teams that the players use in games. Because the players contained in the loot box are determined by chance, the contents cannot be influenced. The fact that football players sometimes have a high value and can occasionally be traded represents a violation of the Dutch Betting and Gaming Act.
EA challenged the administrative order at the District Court of The Hague, arguing that the loot boxes do not constitute a separate game of chance since they are linked to the game itself, which is a skill-based endeavour with the goal of winning virtual football matches through the agility and competence of different players. They further argued that loot boxes have no monetary value and cannot be converted into money.
Ultimately, EA told the court that the DGA's administrative order violated Article 1 of the First Protocol to the Convention for the Protection of Human Rights and Fundamental Freedoms (EP ECHR) because it contributed to unjustified interference with the right to property.
The District Court of The Hague ruled in favour of the DGA, stating that the regulator correctly identified loot boxes as ‘games of chance’. In its decision, the Court said that while the loot boxes are part of a game, they can also be played as a stand-alone game. As the content of loot boxes is not determined by the agility or any similar characteristic of the player, this constitutes a game of chance. EA offers Packs (i.e. loot boxes), which players can open (i.e. buy) and win items that could represent a high economic value even though participants cannot in any way influence the contents of the Packs. That Packs and prizes can be traded on the internal transfer market as well as on the black market also qualifies them as games of chance.
The Court viewed the virtual economy within the game as a real economy since virtual items can be valued for real money on the basis of trades outside the game. The Court even named a specific value, saying that "FUT 5,000 coins are approximately equal to EUR 1". A special version of the virtual player Gullit was offered as a “buy-it-now option” with a minimum value of FUT 9,970,000 coins (EUR 1,994).
According to the Court, circumstances such as the intention of the provider or player, the degree of transparency of the price offer and odds of winning, always having a prize, the frequency the game is played, the lack of a deposit, payment or convertibility in money, the designation of a winner, mutual competition and the starting point of a closed circuit are not important in determining whether the Betting and Gaming Act has been violated.
The Court also deemed that the EP ECHR was not violated by the DGA's order. The public interest contained in the prevention of gambling addiction (especially among minors), the protection of consumers and the prevention of crime and illegality were legitimate objectives. The Betting and Gaming Act provides a sufficient legal basis for enforcement of these principles.
Other countries, such as Belgium, have outlawed loot boxes although jurisdictions such as the UK and New Zealand have decided that loot boxes do not meet the standard of gambling. In the Netherlands, the controversy will continue since EA has announced that it will appeal this decision and consider further legal routes, such as a EU judgment to provide clarity on the matter. We will keep you informed of any developments.
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