Video Game Maker Paying $20 Million in FTC Kid-Privacy Case

The maker of the popular video game Genshin Impact will pay $20 million to settle claims it violated kids’ privacy and deceived players about the cost of winning sought-after prizes, the U.S. Federal Trade Commission said Friday.

Singapore-based Cognosphere mishandled data it collected on children who played the game by improperly sharing it with others, including advertisers, in violation of US law, the FTC alleged. The company, which does business in the US under the name HoYoverse, also used a convoluted and chance-based system to obscure the true cost of prizes in so-called loot boxes, the agency said.

“Genshin Impact deceived children, teens, and other players into spending hundreds of dollars on prizes they could never win,” said Samuel Levine, director of the FTC’s bureau of consumer protection. “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 company didn’t admit wrongdoing. “Genshin Impact is a popular free-to-play game designed for older teens and adults,” Cognosphere said in a statement. “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.”

The maker of the game, which is rated T for teens by Entertainment Software Ratings Board, said it 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.”

The settlement requires approval by a federal judge before becoming final. It was filed in federal court on behalf of the FTC, along with the complaint, by the Justice Department.

$6 Billion

Released in 2020, Genshin Impact is a role-playing game involving collectible characters with unique fighting skills. It was one of the first Chinese video games to go viral in the US. The game was developed by Chinese developer MiHoYo, which is part of Singapore’s HoYoverse.

In Genshin Impact, players purchase chances to win particular characters and items. The game has brought in more than $6 billion in revenue on mobile devices, according to data from AppMagic, and is also available on PCs, Microsoft Corp.’s Xbox and Sony Group Corp.’s PlayStation consoles.

According to the FTC, the company collected personal information of children without their parents’ consent. “HoYoverse also shares device-related persistent identifier information and records of the player’s engagement, progress, and spending within the game with third-party analytics and advertising providers,” according to the complaint.

Genshin Impact players pay real money for virtual currency used for the chance to win virtual prizes. But the FTC said the game publisher “requires consumers to 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. The purchasing process obscures the reality that consumers commonly must spend large amounts of real money to obtain 5-star heroes.”

The FTC alleges that the company’s monetization strategy is deceptive and opaque. Gamers win rare digital characters and items “after engaging in a complicated and confusing series of transactions involving multiple tiers of currency with different exchange rates,” the agency wrote in its complaint. That practice “serves to obscure the true amount of money that players are spending on the game,” the complaint said.

As part of the settlement, the company must allow users to pay cash to directly purchase content in loot boxes, the FTC said. It’s also barred from misrepresenting the odds of loot boxes, must disclose the cash value of its virtual currency and is prohibited from allowing kids under 16 to purchase loot boxes without parental consent, the agency said.

Bloomberg reported Thursday that the FTC planned to settle the deceptive practices claim.