Pair of Class Action Lawsuits Filed Against Google and Apple Over Loot Boxes

Jun 15, 2020

SUMMARY

On June 12, 2020, two separate class action lawsuits were filed in the Northern District of California against Google (Coffee et al. v. Google LLC, 5:20-cv-03901) and Apple (Taylor et al. v. Apple, Inc., 5:20-cv-03906) over the presence of games containing loot box mechanics in their respective app stores.

LOOT BOXES

Loot boxes are in-game mechanics that allow players to open a virtual container to receive randomized items. Players can purchase loot boxes with in-game or real-world currency. Some loot boxes will allow a player to receive additional loot boxes. An example loot box from Star Wars Battlefront 2 (arguably the game that started the controversy by locking necessary game content behind loot boxes instead of purely optional items) is below:

THE COMPLAINTS

Both complaints are substantially similar so we will discuss them collectively. Both complaints dramatically begin with the following quotes from Epic Games co-founder Tim Sweeney:

“We should be very reticent of creating an experience where the outcome can be influenced by spending money. Loot boxes play on all the mechanics of gambling except for the ability to get more money out in the end.”
“Do we want to be like Las Vegas, with slot machines or do we want to be widely respected as creators of products that customers can trust?”
“We have businesses that profit by doing their customers harm.”

Plaintiffs argue that loot boxes are gambling, quoting government officials of Belgium and Great Britain, as well as psychologists. They provide the examples of Mario Kart Tour, FIFA Soccer, Roblox, Brawl Stars, Final Fantasy Brave Exvius (Google only), and Dragon Ball Z: Dokkan Battle (Google only) as games containing loot box mechanics. Plaintiffs point out that the defendants derive substantial revenue from the games containing loot box mechanics.

Plaintiffs identify the class as: “All persons who paid to receive randomized virtual items from a purchase (also known as ‘Loot Boxes’) within an App downloaded from the [applicable app] store.”

There are three causes of action all related to the sale of games containing loot box mechanics:

Unlawful and Unfair Business Practices in Violation of California’s Unfair Competition Law (“UCL”)
Unfair and Deceptive Acts and Practices in Violation of the Consumers Legal Remedies Act; and
Unjust Enrichment

ISSUES

The lawsuits raise a number of interesting questions/issues that will have to be addressed or overcome to prevail. We’ll follow the cases to see how things develop, but a couple of the many issues include:

Are loot boxes gambling under California law?

In general, most gambling statutes require three elements to be met for an activity to be considered gambling:

Consideration (a bet)
Chance (jurisdictions vary on how much chance is required); and
A prize.

Plaintiffs asserts that under California law, games containing loot boxes constitute illegal “slot machines or devices” citing California Penal Code § 330(d). The California statute language matched up to the general elements are as follows:

Consideration - “the insertion of any piece of money or coin or other object, or by any other means”;
Chance - “by reason of any element of hazard or chance or of other outcome of operation unpredictable by him or her”;
Prize - “any piece of money, credit, allowance, or thing of value, or additional chance or right to use the slot machine or device, or any check, slug, token, or memorandum, whether of value or otherwise, which may be exchanged for any money, credit, allowance, or thing of value.”

In a separate part of the statute, “thing of value” is defined as “any money, coin, currency, check, chip, allowance, token, credit, merchandise, property, or any representative of value.” This would seem to exclude virtual items that are not exchangeable for currency. However, in addition to “thing of value” an “additional chance or right to use the … device” is also included in the prize element. Some, but not all, loot boxes have prizes that provide more loot box plays. Plaintiff seems to put both types into the same category, but whether a loot box provides additional game play could be important to the California gambling analysis.

Can Google and Apple be held liable for the in-game mechanics of the games sold on their platforms?

Google and Apple would most likely argue that any complaint with a specific game’s mechanics should be with the game publisher. For example, Google’s terms of service include the following:

You agree to release GPC, Google, and other GPC affiliates, and their agents, contractors, officers and employees, from all claims, demands and damages (actual and consequential) arising out of or in any way connected with a dispute. You agree that you will not involve GPC in any litigation or other dispute arising out of or related to any transaction, agreement, or arrangement with any Seller, other Buyer, advertiser or other third party in connection with the Service. If you attempt to do so, (i) you shall pay all costs and attorneys' fees of GPC, Google, and other GPC affiliates and shall provide indemnification as set forth below, and (ii) the jurisdiction for any such litigation or dispute shall be limited as set forth below.

SIDE NOTE

Plaintiffs state that the platforms “implicitly concede[] the Loot Boxes in its … store games are a form of gambling. Like the California state lottery, [the platform] requires its App Developers to disclose the ‘odds of winning’ particular items in the Loot Boxes for the games it distributes.” This is somewhat disingenuous. Some countries where Google and Apple operate require such disclosure (such as China and South Korea), while not considering loot boxes gambling. Additionally, a number of game companies have voluntarily agreed to publish loot box odds in light of recent criticism. The platforms’ requirements that game publishers post their loot box odds could just be to ensure compliance globally and to provide some transparency over the practice and not some tacit admission that they promote illegality.