The developer of the popular video game Genshin Impact has reached an agreement with the Federal Trade Commission (FTC) to pay $20 million and implement new measures to prevent children under 16 from making in-game purchases without parental consent. This settlement addresses allegations that the company violated a children's privacy law and misled users about the costs and odds associated with in-game transactions.
Samuel Levine, Director of the FTC’s Bureau of Consumer Protection, stated, “Genshin Impact deceived children, teens, and other players into spending hundreds of dollars on prizes they stood little chance of winning. 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.”
The complaint was filed by the Department of Justice following a referral from the FTC. It accuses Singapore-based Cognosphere Pte. Ltd and its California subsidiary Cognosphere LLC, operating as HoYoverse in the U.S., of marketing Genshin Impact to children while violating the Children’s Online Privacy Protection Rule (COPPA). The company allegedly misled players regarding their chances of winning sought-after "five-star" loot box prizes and obscured the actual costs involved.
Genshin Impact is free to download but earns revenue through in-game virtual currency sales. Players advance by collecting virtual heroes, with five-star heroes being highly desirable yet obtainable only through loot boxes purchased with virtual currency. The complaint claims that this purchasing process often leads consumers to spend significant amounts without realizing it.
The FTC alleges that HoYoverse's promotional strategies, including using limited-time event banners and social media influencers popular among children, create false impressions about winning odds for five-star prizes. The game's anime-style graphics and characters appeal directly to young audiences.
Furthermore, HoYoverse is accused of not complying with COPPA regulations by failing to notify parents or obtain verifiable parental consent before collecting personal information from children under 13. The company allegedly shared user data with third-party analytics firms without meeting COPPA requirements.
Under a proposed order pending federal court approval, Cognosphere Pte. Ltd and Cognosphere LLC will face several restrictions:
- They must prevent minors under 16 from buying loot boxes without explicit parental consent.
- They are prohibited from selling loot boxes via virtual currency without offering a real-money option.
- They must accurately represent loot box odds and pricing.
- They are required to disclose odds for loot boxes and exchange rates for virtual currencies.
- They must delete any previously collected data from children under 13 unless parental consent is obtained.
- They are required to adhere strictly to COPPA's notice and consent mandates.
The decision by the FTC was unanimous at 5-0 in favor of referring this case for legal proceedings. Commissioners Andrew Ferguson and Melissa Holyoak agreed on some counts but dissented on others.
This case underscores the FTC's commitment to consumer protection and competition promotion while emphasizing lawful practices regarding children's online privacy.
