Professionals Analysis

The basic logic of blind box supervision lies in the following aspects:

Its essence is to avoid adverse selection of consumers leading to the trend of "blind-box market" towards "substandard product market". The "inferior market effect", also known as the "the Market for Lemons effect", means that "in the case of information asymmetry, good products are often eliminated and inferior products will gradually occupy the market, thus replacing good products, resulting in inferior products in the market". Mr. Akerlov cited a case study of the second-hand car market in his paper "The Market for Lemons: Uncertainty of Product Quality and Market Mechanism" published in 1970, which sates that it is evident in the second-hand car market that sellers have more information than buyers, and the information between the two is asymmetric. Buyers will definitely not believe the seller's words, even if the seller's words are exaggerated. The only way for buyers is to lower prices to avoid risk losses caused by information asymmetry. The low price of buyers also makes sellers unwilling to provide high-quality products, resulting in low-quality products flooding the market, but high-quality products being expelled from the market and will ultimately lead to a contraction of the second-hand car market.[2]

According to psychologist Skinner's experiment, he set up a box where a small white mouse was placed, and a food dispenser was installed inside the box. The small white mouse could obtain food once by pressing the lever inside the box. After several repetitions, the mice will form a conditioned reflex of feeding with a pressure bar. If the pressure bar is no longer available or only occasionally able to obtain food, the mouse will fall into a prediction obstacle and can only continuously press the mechanism. This experiment simulates why 'gambling' is addictive.

Therefore, blind box marketing may also lead to the same addiction problem, which needs to be addressed directly by regulatory authorities.

Overheated speculation in the Secondary market has always been the object of close attention and regulation by the regulatory authorities, especially the risks involving gambling.

To sum up, based on the vision that such fundamentals as protection of consumer rights, prevention of gambling, prevention of addiction and fight against waste shall be managed, the trend of blind-box regulation has been increasing.

There is a view that blind box operation reflects "the practical characteristics of mixing with award-winning sales behavior, as well as the regulatory dislocation of difficulties in current award-winning sales regulations".[3]

For example, if a blind box is for a sale of a regular pen, consumers will have a 0.05% chance to win a "surprise" pen, which is co-created with a luxury brand and has a value 20 times that of a regular pen. In this case, blind box consumption exhibits a "rewarding" nature and the generation of such reward is both random and incentivized by prize sales, which has strong homogeneity with prize sales. The difference between it and prize sales is reflected in that the sales of blind boxes are sales integrated with rewarding, while prize sales are sales separated from rewarding in its appearance.

In this case, should blind box sales comply with the regulatory requirements governing award-winning promotions, such as the Anti Unfair competition Law and the Interim Provisions on Regulating Sales Promotion? For example, should the special blind box be limited to no more than $50,000 if it can be considered a single product "prize"? Should the probability of winning a special blind box or the number of prizes be disclosed?

We believe that, in principle, the basic motivation for biased legal protection to consumers lies in a set of presuppositions: in the game between the operator and the consumer, the operator has a stronger ability to set up all the pricing rules, quality standards, all the ways of sales realization, probability and prize distribution, and can fully evaluate and even calculate his own "cost-benefit" model. However, consumers are unable to conduct such a comprehensive review when making consumption decisions. Therefore, in order to avoid being overly influenced by the lure of "preferences come true" on consumption decisions, it is necessary to provide consumers with adequate information for forming expectations and making decisions.

Therefore, regardless of whether blind box sales belong to the type of "prize sales", it is necessary to ensure complete delivery and disclosure of information regulations, which can be referred to in the Interim Provisions on Regulating Promotion Behavior. This is also reflected in the basic requirements of Article 9 (1) of the Blind Box Guidelines.

In general, the incentives for consumers to purchase blind boxes include the basic material incentives and "box opening" to find or "catch" psychological satisfaction of the spiritual incentives. To ensure the effectiveness of the latter type of mental stimulation, the setting of the blind box should be random, and the result that the consumer may get from buying the blind box is accidental but not preset in advance.

Therefore, special attention shall be paid to the possible risk of false advertising of blind box operating activities carried out in the form of "inventory clearance". For example, when an operator sells blind boxes for shoes and clothing, they claim that consumers who purchase blind boxes will "randomly obtain any of the cultural shirts on sale", but in reality, they are selling unsold products with specific inventory, which poses a risk of false advertising.

"Blind box operators shall not use backend manipulation to change the extraction results or arbitrarily adjust the extraction probability to induce consumption in a disguised form. They shall not refuse or intentionally delay the distribution of blind boxes through discounting, repurchase, or exchange. They shall not set up empty boxes" , as provided under Article 9 (2) of the Blind Box Guidelines.

With respect to the blind sales by means of "stock sales", attention shall be paid to the content setting in the publicity document to ensure that there are no false or misleading wordings constituting disguised inducement of consumption.

According to the pricing legal system, the basic principle of business behavior pricing is "clearly marked pricing", but the inherent nature of blind box blind buying and blind dismantling is easy to violate the "clearly marked" requirements. The compliance concerns hidden behind this set of contradictions are mainly reflected in the rationality of the pricing mechanism for blind box profits.

Taking a "special" blind box as an example, unit sale price of a regular model is 100 yuan. Each blind box will have a short sleeved T-shirt of comparable value, with random sizes, colors, and styles. In addition to the regular model, consumers have a 0.3% chance of purchasing a "special" blind box at the same unit price, which will come with a tie worth 1500 yuan. At this point, the material value of the blind box itself is manifested as fixed consideration and risk consideration. The short sleeved T-shirt that consumers can buy with 100 yuan is a fixed consideration, and there is a small chance that they can realize the Risk premium, that is, an additional income of 1500 yuan.

Due to the existence of this "small to big" mechanism, some viewpoints in practice believe that this is in line with the characteristics of "winning over losing" in gambling behavior, and there may be risks involved in gambling. The interpretation of gambling in local regulations in various regions also revolves around this characteristic. Some scholars have summarized that "any activity that uses property as a bet rather than a win" constitutes gambling. The items developed in the blind box are considered "lost" if they are lower than the invested assets, and "won" if they are higher than the invested assets.[4]

Therefore, from the perspective of avoiding such compliance risks, the operators shall, in combination with the compliance guidelines, isolate several dimensions of gambling risk factors, including:

(1) avoiding price deviations and that blind box prices deviate significantly from normal commodity prices; (Article 8, Paragraph 1 of the Blind Box Guidelines)

(2) pricing based on market factors; (Article 7, Paragraph 1 of the Blind Box Guidelines)

(3) prohibiting setting empty blind boxes; (Article 9, Paragraph 2 of the Blind Box Guidelines)

(4) prohibition of disguised gambling; (Article 21 of the Blind Box Guidelines)

(5) no entry into secondary market; (Article 11, Paragraph 2 of the Blind Box Guidelines) and

(6) setting the upper limit of blind box pricing (e.g., not exceeding 200 yuan). (Article 8, Paragraph 2 of the Shanghai Blind Box Business Activity Compliance Guidelines)

On the one hand, the core experience of blind box games lies in the consumer's sense of surprise when opening the box. If the sold blind box has been opened, resulting in the specific style inside the blind box being known by the consumer, the value of the product will be derogatory or some value will have been realized (a certain "happiness" of the consumer has been satisfied or lost). At this point, requiring the operator to accept unjustified returns undermines the underlying business logic of blind box operations, and can refer to the application of "products with significant value impairment after activation or trial use" instead of unjustified returns.

On the other hand, if the return of goods by a consumer occurs before the opening of the blind box, it may be considered that the consumer neither uses the goods, nor realizes certain spiritual value, neither the material nor spiritual value of the goods sold by the blind box is used, the secondary sales are not affected, and the consumer shall be allowed to claim for unconditional return.

Distinctions are made under Article 17 of the Blind Box Guidelines based on the above:

Moreover, similar provisions are included in the Shanghai Blind Box Business Activity Compliance Guidelines released in January 2022.

Article 11 (1) of the Blind Box Guidelines proposes to "encourage blind box operators to establish a minimum guarantee mechanism", which is mainly reflected in such aspects as the time for drawing, the upper limit of drawing amount, and the upper limit of times for drawing.

The problem in practice is how to set up the minimum guarantee mechanism, and how to set up the static quantity limit for the dynamic change of the blind box production quantity.

We believe that the core lies in information statistics and spot check tracking mechanisms. Firstly, digitize and store all categories, total quantity, proportion of goods in sets, surplus information, and probability statistics of the series of products; Secondly, for blind boxes sold online, unnecessary manual intervention should be avoided, and orders and sorting should be generated through fair and random methods; Finally, spot checks should be conducted and archived during the pre-production and in process sales stages, and data back-testing and tracking records are conducted during the post sales completion stage. This is also in line with the business record system required by Article 10 of the Blind Box Guidelines.

Either the Blind Box Guidelines issued by the Municipal Regulatory Commission or the compliance guidance documents promulgated by local law enforcement departments (such as the Shanghai Municipality Guidelines for Compliance of Blind Box Business Activities) are used to guide blind box operators' compliance actions from the perspectives of education and guidance. However, no chapter of "Legal Liability" is included in such documents. Does this mean that the liability of regulatory punishment for violation of the Blind Guidelines is lower?

We don't think so. Firstly, according to the basic logic of blind box regulation, the regulation trend is obviously enhancing, with a high possibility of new legislation; Secondly, the Blind Box Guidelines are actually a compilation of common compliance requirements listed by law enforcement agencies based on superior laws, similar in form to normative requirements and their common illegal behaviors; Finally, taking the illegal promotion of "inventory clearance" as an example, in addition to the responsibility for administrative penalties, there may also be a civil liability risk of "one for three refunds" for consumer fraud.

We therefore suggest that operators should follow the regulatory guidance documents to implement corresponding management measures and match reasonable institutional arrangements.

[1] 刘志峰、田欣：《数字政府背景下盲盒营销的信用监管》，载《世界经济与政治论坛》2022年第4期。

[2] 百度百科：《柠檬市场理论》，访问链接：https://baike.baidu.com/item/%E6%9F%A0%E6%AA%AC%E5%B8%82%E5%9C%BA%E7%90%86%E8%AE%BA/4267529?fr=ge_ala，访问时间2023年7月14日。

[3] 祝睿，《盲盒销售行为的经济法规制——基于有奖销售规制视角展开》，载《西部法学评论》2022年第4期。

[4] 马治国、徐济宽，《数字经济背景下盲盒营销模式的法律治理》，载《北京工业大学学报（社会科学版）》2022年第1期。