Lawsuit Hits Genshin Impact Distributor with $20 Million Fine Due to Controversial Loot Box Practices
Image by way of Cognosphere / HoYoverse
Genshin Impact developer Cognosphere will pay a $20 million penalty and prohibit loot box sales to minors under 16 (unless they acquire parental consent) to resolve a conflict with the Federal Trade Commission (FTC).
Cognosphere, operating as HoYoverse in the United States, was charged by the FTC with breaching child privacy laws by misleading young Genshin Impact players and others concerning the actual cost of in-game purchases and the chances of winning rare rewards.
A lawsuit lodged against the company by the Department of Justice (upon the FTC’s suggestion) asserts that the studio “actively marketed Genshin Impact to children and inadequately safeguarded their private information, in violation of the Children’s Online Privacy Protection Act (COPPA).”
It states that HoYoverse failed to clearly reveal the chances of winning “five-star” loot box rewards or sufficiently indicate how much acquiring those items would actually cost. The firm is also accused of obscuring this process by implementing a convoluted in-game currency system.
According to the complaint, some minors expended “hundreds or even thousands of dollars” seeking rare rewards.
“Genshin Impact misled children, young people, and other players into spending large amounts of money on prizes they had a minimal chance of receiving,” stated Samuel Levine, director of the FTC’s Bureau of Consumer Protection.
“Companies that utilize such dark-pattern strategies will be held accountable if they mislead users, particularly children and teenagers, regarding the actual costs of in-game purchases.”
A proposed resolution detailing the settlement states Cognosphere will be obligated to pay a $20 million fine. This will include:
-
Banned from allowing minors under 16 to purchase loot boxes in their games without parent’s explicit consent;
-
Banned from offering loot boxes using virtual currency without enabling players to purchase them directly with real money;
-
Banned from falsely representing loot box odds, prices, or features;
-
Required to disclose loot box odds and conversion rates for multi-tiered virtual currencies;
-
Required to delete any private information previously collected from minors under 13 unless they obtain parental consent to retain such data; and
-
Required to comply with COPPA, including its notice and consent requirements.
The resolution must be approved by a federal judge before it can take effect.
In a statement released on the HoYoverse website, Cognosphere announced it would “enhance and increase transparency” regarding its parental consent and virtual currency practices. It also characterized the FTC’s allegations as “incorrect.”
“Anime-style games and shows are well-received by global audiences and players of various ages. Genshin Impact is a popular free-to-play, anime-style game aimed at older children and adults,” the statement read.
“While we disagree with many of the FTC’s claims, we have agreed to this settlement because we value the trust of our community and are committed to transparency for our players. Under the agreement, we will implement new age-gating and parental consent measures for children and young teens, and enhance our in-game disclosures regarding virtual currency and rewards for players in the U.S. in the upcoming months.”
About the Author
News Editor, GameDeveloper.com
Game Developer news editor Chris Kerr is an award-winning journalist with over a decade of experience in the gaming sector. His work has been featured in prominent print and digital outlets including Edge, Stuff, Wireframe, International Business Times, and PocketGamer.biz. Throughout his career, Chris has reported on major industry events including GDC, PAX Australia, Gamescom, Paris Games Week, and Develop Brighton. He has served on the judging panel for The Develop Awards multiple times and has appeared on BBC Radio 5 Live to discuss breaking news.