Cognosphere, the US subsidiary of Genshin Impact developer miHoYo, agreed to a $20 million settlement over allegations of “deceptive marketing” in the game’s gacha system and violations of child privacy laws, according to an announcement by the US Federal Trade Commission (FTC) last Friday. Genshin Impact is now barred from offering gacha content to players under 16 without parental consent.
Gacha is a game mechanic where players spend in-game currency, often purchased with real money, to receive random virtual items, characters, or rewards, similar to a lottery or capsule toy vending machine. The term gacha originates from Japanese, derived from “gachapon” or “gashapon,” which are coin-operated capsule toy vending machines in Japan.
Why it matters: The controversy surrounding Genshin Impact has drawn attention to concerns over gacha mechanics’ similarity to gambling, potentially exploiting players and violating child protection laws. However, US scrutiny of miHoYo, a Chinese developer, also reflects broader geopolitical tensions between the two countries, including actions such as the recent US ban on TikTok.
Details: The FTC’s complaint accuses Genshin Impact of misleading loot box (gacha) practices, lack of transparency, unfair targeting of minors, and violations of child privacy laws.
- The FTC’s complaint claims Genshin Impact misled players, especially children and teens, by promoting rare five-star loot boxes (gacha) that required large amounts of real money but came with a low chance of winning. Although the game discloses the odds, players often spend more than expected, leading to misconceptions about the cost and odds of obtaining five-star characters and weapons.
- The complaint also criticizes Genshin Impact’s design for appealing to children through colorful animations, anime-style graphics, and childlike characters. Its promotional and marketing strategies target underage players while failing to provide sufficient transparency, the FTC claims.
- Genshin Impact was classified as a child-directed online service but failed to notify parents and obtain verifiable parental consent as required by COPPA (Children’s Online Privacy Protection Act), according to the FTC. Despite being aware that children under 13 were using the service, it continued to collect their personal information, such as user IDs and device identifiers, and shared it with third-party analytics firms and advertisers.
- “Genshin Impact deceived children, teens, and other players into spending hundreds of dollars on prizes they stood little chance of winning,” 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.”
- In response to the FTC’s allegations, miHoYo issued a statement acknowledging that Genshin Impact’s gacha mechanics included misleading marketing and violated child privacy laws. While disputing the accuracy of some claims, miHoYo agreed to a $20 million settlement, citing its commitment to transparency and maintaining player trust.
- Meanwhile, miHoYo pledged to implement a range of corrective measures, including banning in-game purchases for players under 16 without parental consent, deleting personal data collected from children under 13 without consent, and ensuring full compliance with the Children’s Online Privacy Protection Act (COPPA). The gaming company also said it plans to introduce new age restrictions and parental consent safeguards for children and teens in the coming months.
Context: ByteDance’s TikTok temporarily halted its service in the US due to a government ban, which took effect on Jan. 19. The US government alleged that TikTok posed national security risks, citing concerns over data privacy and potential access by the Chinese government.
- On the same day, ByteDance’s gaming subsidiary, Moonton Technology, announced the sudden suspension of several games in the US, including the MOBA mobile game Mobile Legends: Bang Bang and the Team RPG game Watcher of Realms.
