Potential €5m in Penalties for EA following Landmark Judgement in the Netherlands regarding Loot Boxes

ARTICLE

13 Nov 2020

Loot boxes are often vilified by gambling regulatory authorities for their pay-to-win mechanism which raises addiction concerns. 

Kansspelautoriteit (hereinafter referred to as ‘KSA’), the gambling regulator in the Netherlands, has succeeded in a landmark case against Electronic Arts (hereinafter referred to as ‘EA’) following an altercation regarding the loot boxes found in FIFA. In April 2018, KSA conducted a study on loot boxes and concluded that “the content of these loot boxes is determined by chance and that the prizes to be won can be traded outside of the game: the prizes have a market value." Under the current gambling laws in the Netherlands, it was concluded that “loot boxes are prohibited”.

In lieu of the above, KSA determined that EA acted in violation of the Betting and Gaming Act after failing to remove loot boxes from FIFA18 and FIFA19 in the Netherlands. EA objected to this and argued that it was not within KSA’s capacity to enforce the removal of these loot boxes. EA held that the Betting and Gaming Act “does not provide a sound basis for the order subject to a penalty”, and that the penalty issued was hence “unlawful and disproportionate”.

On 15 October 2020, a year after KSA attempted to enforce the penalty on EA, a “cease and desist” penalty was issued by the Court of the Hague. The Court’s final decision determined that the opening of these loot boxes may be likened to “games of chance”.

The Court stated that “The fact that it concerns a so-called open standard and that there is no case law as yet regarding the specific question whether loot boxes should be assessed as a game of chance does not mean that the standard was not known or that it was not reasonably possible for plaintiffs to foresee that the aforementioned article applies to the Packs offered”. This verdict hence authorised KSA to launch enforcement proceedings against EA and others involved in similar violations.

EA is now subject to a penalty of €250,000 per week and may reach a maximum of €5,000,000. EA will continue to be subjected to this penalty until all loot boxes are removed from FIFA19 and any other subsequent FIFA games in the Netherlands.

EA is expected to lodge an appeal against this latest decision with the Administrative Jurisdiction Division of the Council of State.

We shall be providing updates on the evolution of this case as it happens.