‘Genshin Impact’ Distributor Cognosphere Hit With $20 Million FTC Fine For Privacy Violations And Deceptive Loot Box Practices, Will No Longer Be Allowed To Sell Random Item Containers To “Teens Under 16 Without Parental Consent”
After being hit with a complaint from the US Department of Justice alleging that they violated local child privacy protections with their loot box sales, Genshin Impact developer miHoYo has agreed to settle the legal dispute by both paying a $20 million fine and banning the sale of the items to players under the age 16 without their parents’ consent.
Per a press release published by the US Federal Trade Commission (FTC) on January 17th, the aforementioned complaint alleged that not only did miHoYo, via their Cognosphere global publishing arm, “collect personal information from children before (and without ever) notifying parents and obtaining parental consent, in violation of the requirements of the Children’s Online Privacy Protection (COPPA) Rule,” but they “also engaged in unfair business practices related to loot box transactions in Genshin Impact.”
In terms of the former allegation, per the cited COPPA Rule, websites and services “directed” towards those under the age of 13 must both notify parents/guardians about the personal information they collect and get permission from them to do so.
According to the FTC and DOJ, Cognosphere, who also does business under the HoYoverse moniker, knowingly violated this law because while they were aware that children played their game, as indicated by their “use of influencers who appeal to children and promotional advertising directed to children”, they have still “taken no additional steps to age-gate the game or comply with the COPPA Rule’s parental notice and consent requirements.”
Regarding the developer’s loot box practices, the US government agencies held that Cognosphere “requires consumers engage in a complicated and confusing series of in-game transactions to open loot boxes, involving multiple types of in-game virtual currency with different exchange rates,” with said process only serving to obscure “the reality that consumers commonly must spend large amounts of real money to obtain 5-star heroes.”
“Considered as a whole, Genshin Impact’s confusing series of real and virtual currency rates, from dollars to Genesis Crystals to Primogems to Wish tokens to loot boxes, in mismatched and unintuitive denominations, serves to mislead consumers, especially children and teenagers, about the amount of money that players spend on loot boxes on an ongoing basis, and the amount of money that players would likely need to spend to obtain certain prizes,” they argued.
Further, the DoJ took issue with the “marketing and promotion tactics used to entice players to open loot boxes were unfair to children and teenagers,” particularly in regards to how “HoYoverse’s [limited time] Event Banners create urgency for players to spend tokens and virtual currency, and ultimately real money, to open loot boxes” and their partnering with influencerssuch as popular YouTuber Alia ‘SSSniperWolf’ Shelesh, who “appeal to and are popular among children”
The organization also claimed that Cognosphere “overstates, and misleadingly discloses, loot box odds”, even going so far as to approve a piece footage used on-air by SSSniperWolf to “depict a fake loot box prize win, in a way that would have been impossible in the Genshin Impact game.”
While still needing approval from federal judge, Cognosphere are being fined $20 million as punishment
Since Genshin Impact‘s launch in 2020, its made an estimated $6.1 billion in revenue (up to 2024). As such, the fine is just over 0.3% of lifetime revenue, or nearly 2.9% of its total revenue from last year.
The fine also comes with several mandatory changes that must be made to their business practices within the next six months, including prohibiting children under 16 from purchasing loot boxes “in their video games without a parent’s affirmative express consent”, making it possible to buy loot boxes with real money in addition to virtual ones, and disclosing both actual “loot box odds, price and features” as well as the “loot box odds and exchange rates for multi-tiered virtual currency”.
miHoYo must also “delete any personal information previously collected from children under 13 unless they obtain parental consent to retain such data” and bring themselves up-to-date with their COPPA compliance.
In a statement issued to Eurogamer, Cognosphere agreed to comply with the orders, but made clear their disagreements with some of the FTC’s assessment, insisting, “Animation-style games and shows are well-received by global audiences and players across various ages. Genshin Impact is a popular free-to-play, anime-style game designed for older teens and adults.”
“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. Under the agreement, we will introduce new age-gate and parental consent protections for children and young teens and increase our in-game disclosures around virtual currency and rewards for players in the U.S. in the coming months.”
NEXT: ‘Genshin Impact’ Boycotters Celebrate After Thieves Break Into MiHoYo CEO’s Rental Car: “DESERVED”
More About:Video Game News
Read this Next
