miHoYo was fined $20 million by the FTC. How to respond to compliance risks related to children when going overseas to the United States?

Image source: Ideogram

According to news from the game compliance company k-ID, on January 17, 2025, the U.S. Federal Trade Commission (FTC) announced a penalty against "Genshin Impact" publisher HoYoverse (miHoYo). MiHoYo will pay a fine of $20 million and join a 10-year compliance monitoring program; additionally, it must delete information about child players collected without parental consent and stop selling loot boxes to players under 16 who have not passed parental consent (VPC) verification.

Conclusion: The focus of this penalty is not only that the FTC will further strictly enforce the Children's Online Privacy Protection Act (COPPA), but more importantly, the FTC believes that selling loot boxes to children and adolescents without obtaining parental consent constitutes "unfair and deceptive acts or practices" as stated in Section 5 of the FTC Act.

Key Points of the Case

1. Even if rated "T" by ESRB, the game may still be deemed "child-directed" by the FTC

Similar to Epic Games' product "Fortnite," which was fined in 2022, "Genshin Impact" was initially rated as a "Teen (T)" game by the Entertainment Software Rating Board (ESRB) and marked as "12+" in the App Store. The reason for this rating was the presence of violent fantasies and alcohol-related content in the game.

However, the FTC further reviewed the game content (such as cartoon-style characters resembling children) and miHoYo's marketing activities (such as advertising materials designed for children and collaborations with KOLs who have a large number of underage fans) and ultimately concluded that "Genshin Impact" is still a "Child-Directed" game under the definition of COPPA.

Complaints indicated that although miHoYo added a "Children's Notice" to the privacy policy of "Genshin Impact" in 2022 after the FTC launched an investigation, stating that children under 12 cannot play "Genshin Impact," the FTC noted that miHoYo did not establish a neutral age screening mechanism in the game nor did it seek parental consent for players suspected to be children, both of which are requirements of COPPA for mixed-audience games.

2. The description of loot boxes in "Genshin Impact" is "confusing" and "deceptive"

The FTC pointed out that the in-game purchases in "Genshin Impact" include various complex in-game currencies and gift packs, leading to "cognitive ambiguity" between the pricing of in-game purchases and the actual spending, causing players to spend more on in-game purchases In addition, the FTC also stated that some of miHoYo's advertising materials are overly aggressive and deceptive. For example, miHoYo once collaborated with KOLs to shoot a video where the KOL could directly unbox and obtain ultra-rare equipment, which does not match the actual situation in the game. Furthermore, the FTC indicated that miHoYo's statements regarding the odds of winning when unboxing are also not accurate enough, which can mislead players.

3. Selling unboxed items to children and teenagers without parental consent will incur legal responsibility

The FTC also stated that the unboxing mechanism poses additional risks to child and teenage players because children and teenagers "find it harder than adults to understand the true cost of purchasing digital goods," and their "self-control is weaker, and their behavior is more impulsive than that of adults."

Additionally, the fifth point in the FTC's penalty provisions is noteworthy. The FTC directly stated that promoting and selling unboxed items to players under 18 will be considered "an 'unfair act or practice' in violation of Section 5(a) of the FTC Act (15 U.S.C. § 45(a), (n))." This statement is likely to have a significant impact on the U.S. gaming market. Currently, the FTC still allows miHoYo to continue selling unboxing content, but it must ensure that the unboxed items are not misleading, and players under 16 must obtain parental permission to make purchases.

4. Measures that game companies should take

The FTC's penalties indicate that any unboxing mechanism that may attract child and teenage players for in-game purchases will significantly increase litigation risks in the U.S. market. Manufacturers need to quickly reassess the game's compliance with COPPA and seek suitable VPC solutions for young players.

To reduce risks, game manufacturers should ensure that the form of VPC is flexible and natural enough, rather than simply requiring parents to accept or reject unboxing in one go. They should also allow parents to disable the unboxing feature while still permitting children to access other content in the game.

This article is translated from Finding Genre Success: the Case of Gossip Harbor.