Nintendo faces class action lawsuit over in-game monetization

Nintendo is currently grappling with a class action lawsuit centered around its contentious practice of in-game loot boxes. Commonly referred to as the “gacha pipe” system, these microtransactions involved charging players real money in exchange for a chance at obtaining virtual advantages. Despite discontinuing the randomized system in October 2022, Nintendo continues to face criticism for its approach.

The lawsuit, initially filed last month, has now escalated to the federal level through the California State Court. The plaintiffs allege that Nintendo’s in-game transactions in the popular mobile racing game, Mario Kart Tour, were deceptive, illegal, and morally objectionable, violating consumer protection laws.

Nintendo loot box controversy has been taken to the federal level through the California State Court

Mario Kart Tour’s loot box controversy

For a significant period, Mario Kart Tour, a freemium mobile game particularly popular among young gamers, utilized a luck-based system known as the “Spotlight Pipe” or “gacha pipe”. This feature enticed players to spend in-game currency, known as “Rubies,” for a chance to acquire new gliders, karts, or characters that would enhance their in-game performance.

However, each attempt to obtain these rewards, commonly referred to as a “pull,” required players to spend five Rubies, roughly equivalent to $3 USD. Such loot box mechanics have faced intense scrutiny due to concerns about their predatory nature, particularly when targeting vulnerable audiences. Recognizing the backlash surrounding this practice, Nintendo decided to discontinue the gacha pipe in October 2022 and introduced a more transparent in-game store, although it still involved paid transactions. It is worth noting that other gaming companies have also recently moved away from similar loot box systems.

Allegations of unauthorized expenditure

During the period between 2021 and 2022, before the discontinuation of the gacha pipe, the lead plaintiff, a minor, allegedly made unauthorized charges amounting to over $170 on his father’s credit card through Mario Kart Tour’s loot box feature. While cases exist where players have incurred significantly higher bills through comparable mechanisms, the plaintiff and his father have legitimate grounds for concern.

GamesIndustry.biz reports that Nintendo generated an estimated $293 million in revenue from Mario Kart Tour between 2019 and 2022. The legal filing contends that the plaintiff rarely received valuable rewards from the purchased Spotlight Pipes, and he would not have made such in-game purchases had he been aware of the true odds of obtaining rewards or the absence of a refund policy. Despite attempts by Gizmodo to obtain Nintendo’s comment on the matter, the company has not responded as of the time of publication.

Nintendo has made $293 million in revenue from Mario Kart Tour – Image courtesy of Nintendo

The wider legal landscape of in-game purchases

This lawsuit is part of a broader pattern of legal challenges targeting video game companies regarding contentious in-game purchase systems. Major industry players such as Google, Apple, and Valve Corp. have faced legal complaints related to their promotion and implementation of microtransaction systems that closely resemble gambling.

However, thus far, these companies have largely emerged victorious in such cases, according to an analysis by JD Supra. A Canadian court recently dismissed a lawsuit against Electronic Arts (EA Games), ruling that loot boxes did not constitute “unlawful gambling”.

Gaming companies worldwide have also faced increased scrutiny and investigations by regulatory bodies due to the use of loot box mechanics. In a notable case, Epic Games, the creator of Fortnite, was fined hundreds of millions of dollars, partly due to its methods of encouraging young users to spend money.

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