Korean Regulator Slaps Record Fine on Major Game Developers over Gambling-Like Loot Boxes

Top South Korean game developers could challenge the recent decision of the country’s Fair Trade Commission (FTC) to fine them for misleading customers while promoting purchasable in-game items.

News about South Korea penalizing some of its biggest gaming companies come amid a heating debate about whether the so-called loot boxes in video games and their random contents constitute gambling.

It became known on Sunday that the FTC has imposed fees and penalties of over KRW1 billion to Nexon, Netmarble Games, and NextFloor. Of them, Nexon was the company to face the largest penalty by the regulator. The popular game developer will have to pay a total of KRW944.5 million for breaching provisions in Korea’s Electronic Commerce Act.

The FTC slammed Nexon for the Celebrity Count event within its Sudden Attack game. The event involved players buying counts, each worth KRW900, to assemble a 16-piece puzzle and receive different benefits. Each count contained two puzzle pieces. Promoting the event, the game developer said that each of the 16 pieces could be collected at random chance. However, the FTC argued that Nexon did not provide customers with important information regarding its event, including the fact that the odds for obtaining certain pieces stood at around 0.5%.

According to the regulator, by failing to provide crucial information, the game developer led players to believe that the odds of obtaining each of the 16 pieces were the same. The FTC pointed to an instance of a user spending more than KRW460,000 to obtain all the necessary pieces and assemble the puzzle.

Netmarble will have to pay KRW60 million, while NextFloor was fined KRW5 million for similar failures to explain the nature of their promotions properly and to inform their customers about the odds of winning one item or another from the loot boxes they offered. All three gaming companies were also ordered to make sure that no such practices are deployed in future.

The collective fine of over KRW1 billion was the largest one ever imposed for violations of Korea’s Electronic Commerce Act.

Loot Box Controversy

The recently imposed fines seem to have once again ignited the debate over the nature of loot boxes. The FTC’s decision to punish game developers could also trigger efforts toward the regulation of the items as ones that constitute a gambling activity.

Loot boxes are virtual items that can be purchased within a game for real money. Their contents are revealed only after the purchase is completed. The boxes can contain a random selection of different items that can vary from simple customizable options to rare game-changing objects.

The recent release of the Star Wars Battlefront II game stirred great controversy in the gaming field namely due to the fact that it featured loot boxes. Regulators across Europe, Asia, Australia, and the United States opened investigations into the virtual items in order to determine whether they represented gambling. Opinions on the matter were mixed, but they showed that the loot boxes debate was certainly here to stay.

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