The Federal Trade Commission (FTC) has fined Cognosphere, the publisher behind popular games like Genshin Impact, $20 million. The penalty comes as a result of allegations that the company misled users, particularly children, about the true costs associated with in-game transactions, including the odds of winning sought-after “five-star” loot box prizes. Additionally, Cognosphere allegedly violated the Children’s Online Privacy Protection Rule (COPPA) by collecting personal information from children under 13 without parental consent.
The FTC’s complaint accuses Cognosphere of employing deceptive practices that tricked young players into spending considerable sums on prizes they had little chance of winning. Loot boxes, which are banned in several European countries due to their classification as a form of gambling, remain a controversial topic worldwide. Countries such as Spain and the UK are contemplating stricter regulations, while major tech companies like Apple and Google have enforced rules requiring developers to disclose the odds of winning loot boxes.
“Companies that deploy these dark-pattern tactics will be held accountable if they deceive players, particularly kids and teens, about the true costs of in-game transactions,” stated Samuel Levine, Director of the FTC’s Bureau of Consumer Protection.
Cognosphere’s Response and Commitment to Transparency
The FTC’s investigation into Cognosphere’s practices is spearheaded by its Bureau of Consumer Protection. The inquiry revealed that Cognosphere not only misled users regarding the odds associated with loot boxes but also violated consumer protection laws through these actions. Consequently, Cognosphere is mandated to delete any personal information previously collected from children under 13, unless parental consent was provided.
In response to the allegations and subsequent fine, Cognosphere’s US subsidiary, HoYoverse, issued a statement asserting their disagreement with many of the FTC’s claims. However, they opted to settle in order to maintain community trust and uphold transparency standards for players.
“While we believe many of the FTC’s allegations are inaccurate, we agreed to this settlement because we value the trust of our community and share a commitment to transparency for our players,” HoYoverse stated.
The controversy surrounding loot boxes has prompted increased scrutiny globally. In 2017, Apple mandated developers on its App Store to disclose loot box odds, followed by Google’s similar requirement in 2019. The FTC’s complaint suggests that Cognosphere’s practices led children and teenagers to “spend hundreds of dollars on prizes they stood little chance of winning,” highlighting a significant consumer protection concern.
Moving forward, Cognosphere will be required to comply with the FTC’s order and implement changes to its business practices to prevent further violations. The case underscores the importance of transparency and ethical conduct in digital gaming environments, particularly when young consumers are involved.
What The Author Thinks
The FTC’s fine against Cognosphere serves as a crucial reminder of the need for transparency and accountability in the gaming industry, especially regarding practices that may exploit children. As digital economies continue to evolve, the role of regulatory bodies becomes increasingly vital in ensuring that companies do not undermine consumer rights or engage in deceptive practices. This case not only highlights ongoing issues within the gaming industry but also shows the commitment of authorities to enforce regulations that protect consumers, particularly vulnerable demographics such as children.
