The Association for Child Safety (ANCED) filed seven class actions against game developers and companies that host platforms for game downloading, seeking an injunction to ban loot boxes in online games. Although there is no regulation for loot boxes under Brazilian statutory legislation, the class Plaintiff alleges loot boxes are harmful for children and teenagers, as it may trigger gambling disorders and it is largely based in advertising for children, which is strictly regulated under Brazilian law. In all of the actions, the Plaintiff asks for a preliminary injunction, to order the Defendants to refrain from offering and to suspend any and all loot boxes or other random reward system from the games available to Brazilian users until final adjudication of the case. Plaintiff also seeks an award of BRL 1,5000,000.00 (app. USD 250,000,000), for moral damages (emotional distress) suffered collectively, plus BRL 1,000 (app. USD 200) from each Defendant for each user affected by loot boxes.
To date, Brazil has enacted no specific regulations addressing loot boxes. Efforts to ban loot boxes in Brazil were only highlighted when ANCED filed these class action law suits on the last days of February 2021. However, legislation proposed by Congressman Heitor Freire before the House of Representatives seeks, not to forbid loot boxes, but to require game developers to disclose the statistics and odds of a player redeeming rewards from loot boxes.
Since the class actions were filed on behalf of public interest (and not on the behalf of a specific class), in the event of a ruling favorable to the Plaintiff, individuals who consider to have suffered damages in connection with the facts may file individual lawsuits to claim individual damages.
Key Takeaways
- In the following weeks, Lower court will decide on the request for a preliminary injunction requesting the suspension of loot boxes in Brazil.
- The class actions filed by ANCED may establish new standards regarding loot boxes in Brazil, and might also bring to light to this debate and speed up legislation
In Depth
Brazilian Law does not directly regulate loot boxes, but critics state loot boxes are a form of gambling, which is prohibited in Brazil, and harmful for children and teenagers, as it triggers gambling disorders and is based on advertising targeting children.
The Brazilian class action system provides for injunctive remedies, so, even in the absence of regulation, courts may ban products or severely interfere in business considered harmful to the public interest.
The main argument in these class action lawsuits is that loot boxes are harmful for children and teenagers, as it may trigger gambling disorders and it is largely based in advertising for children, which is strictly regulated under Brazilian law. Moreover, the use of loot boxes in games would be non-compliant with (i) the Gambling Law (gambling, in general, is forbidden in Brazilian territory) and (ii) the Child Safety Law (considering that the developers of the games use the loot boxes as gambling strategies to encourage loyalty from their clientele, which is mainly underage).
The legal basis for the claim in the class action lawsuits is mainly the prohibition on Brazil’s Criminal Code for gambling games as well as the special statutory protections for children.
Recent news reports also suggest that a regulatory ban for loot boxes is on the way. However, these reports appear to refer to the class action law litigation and not to an additional legislative activity. As stated above, it is a special characteristic of the Brazilian class action scheme that specific business practices can be prohibited entirely even where there is no specific regulation on the matter. In the Brazilian Congress, debates on proposed legislation are still in early stages due the Covid-19 Pandemic which suspended activities of almost all Congress Committees. The bill no. 4.148/2019 seeks to regulate loot boxes by standardizing requirements for the fair use of loot boxes in games, such as requiring the disclosure of each item’s probability of being found in the loot box. The bill would also punish those who reject to show the exactly probability with (daily or one time) fines from 3,000 BRL to 100,000,000 BRL. However the bill is silent about child protection, which is one of the main arguments of the class action lawsuits.
