Ethical Issues in Electronic Arts Games: Loot Boxes, FIFA, and 'Whales'

This report discusses the ethical issues surrounding Electronic Arts Games, specifically focusing on loot boxes, FIFA, and 'whales'. It explores whether loot boxes should be considered gambling and whether children should be allowed to spend money on them. The report also examines the negative effects of unethical management on the company, its clients, and the public. It highlights the importance of ethical choices in the gaming industry and provides examples of both positive and negative impacts on companies.

Programme Title BSc Business Management
Module Title Business Ethics and Responsible Management
Module Code (listed on
Moodle and in LTAFP)
Coursework Title Part 1
Word Count 3136

TABLE OF CONTENTS
PART 1...........................................................................................................................................3
Section A....................................................................................................................................4
Section B....................................................................................................................................9
PART 2.........................................................................................................................................13
REFERENCES............................................................................................................................17

PART 1
THE LOOT BOX, FIFA AND ‘WHALES’ REPORT
EA Games
INTRODUCTION
Business ethics means practicing appropriate business regarding enterprise
policies and style of business when it comes to subjects which could be in a grey zone
or controversial. These topics can include insider trading, discrimination, fiduciary
responsibilities, corporate governance, bribery and corporate social responsibility
(CSR). The role of a business in the society is participation and practice of such
initiatives that benefit the community and other stakeholders like employees, investors
and shareholders, government, consumers, suppliers etc. A good ethical behaviour in
the case of electronic gaming industry would involve a written code of ethics and
standards in the company, inculcating an ethical culture by training employees,
executives and managers, and having systems of confidential reporting. Bad ethics in
the company resemble situations like non-adherence to legalities such as regulatory EU
frameworks, treatment of employees, environmental pollution, and dishonesty in
business dealings.
To begin with, the aim of the following report is to outline the ethical issues and
duties within Electronic Arts Games regarding Loot Boxes, Fifa and ‘Whales’. This
report will be written from the perspective of a middle manager, writing a statement to
the senior executives and higher management of EA Games regarding ethics within the
company. The first part will be about analysing and outlining the Loot box system and
whales that are a massive part of the EA industry, these being major problems for the
company, the public and other stakeholders which will be defined by the different
hypotheses and notions that will ultimately answer the question “Should Loot boxes be
considered as gambling and should children be allowed to spend money on them?”
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The second part will be about how the company can improve in the ethics department
and how a leader that follows strict ethic rules can have a major positive impact on EA
Games. The Loot Box scandal surrounded EA Games with a lot of controversy, mainly
regarding Fifa Ultimate Team and Star Wars: Battlefront 2. This report will show the
negative effects that unethical management has on a company, its clients and the public
in general.
Section A
To begin with, Electronic Arts Inc. is a company which is recognised as a
giant in the global digital interactive entertainment sector; the company delivers and
develops content, online services for personal computers, mobile devices and internet-
connected consoles (CNN,2020). Furthermore, EA has more than 300 million players
around the world registered to their services. Moreover, in the 2019 fiscal year, EA
reached a GAAP (generally accepted accounting principles) net revenue of $5.15 billion
(£3.89 billion). The enterprise is renowned for the development and release of The
Sims, FIFA, Battlefield, Need for Speed and many more. Lastly, the company was
founded in 1982 and its global headquarters are located in Redwood City, California,
USA (Annual Report, 2019).
Moving on, the discussion will be over an important subject that can have a major
impact upon a company, the ethical issues. According to Crane and Matten (2015) in
the business world, business ethics is targeting issues of right and wrong. Ethics forces
the business to address ethical questions like: is there any law violated? It will be a win
-win situation for the business but for the customer as well? (Blanchard and
Peale,2000). Stepping forward ethical problems, that surround EA Games have been
identified to be very grave, especially since it surrounds minors. The company has been
accused of creating ways for children to effectively gamble on their services and games,
such as FIFA. Gambling has a massive negative impact on adults, with more than
420,000 people suffering from compulsive gambling in the UK. Over the years, this
number has drastically increased, due to things such as increased number of gambling
shops, economic downturn and more accessibility to the internet.
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For example, on FIFA, players can spend money on ‘packs’ which contain players for
the ‘Ultimate Team’ game mode, where players can build their own teams with players
that they pack. While the concept in itself is good, the way in which EA have
transformed it, makes pack openings seem as gambling. This is due to the fact that
when a pack is opened, the rarity of the card is unknown, which means you could spend
a small amount of money and pack a player that is rare, or you could spend a large
amount of money and pack common players. This is why many people have labelled
packs as gambling, because you blindly spend money on something that is not
guaranteed to you, and the more common players you pack, the more you are tempted
to purchase more packs. This introduces children to gambling from a young age and
could get them addicted, which could lead to serious problems in the future.
Moreover, Electronic Arts Inc. needs to shift its entrepreneurial focus onto its
stakeholders and customers, due to the business being well-known for not listening to
its customers and fans, and rather focusing on ways in which to monetise every aspect
of a game. This is crucial because the company can gain financial and practical support
from the stakeholders.
Corporate Finance Institute (2020) What is a Stakeholder?
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Furthermore, stakeholders are groups of people or individuals that show an interest in
your company; they can be anything from loyal customers, to investors and even
employees, government, community (BBC, 2020). The stakeholders are a very good
way for the company to gain exposure and attract people that are genuinely interested
in the well-being of the enterprise and not really focused on the monetary aspect of the
company. This can be extremely good, as it creates strong bonds between company
and stakeholder, which mean EA won’t be as alone in the entrepreneurial world. At
Electronic Arts, stakeholders only make up 1.37% of the shareholders, a drastically low
number compared to Activision Blizzard, Inc. with 90.70% of shareholders being
individual stakeholders. This tells us that Blizzard is more invested and interested in its
consumers and employees and pays attention to what the customers want. However,
the unethical practices that EA indulges in can have significant effect on specific
stakeholders such as the investors and shareholders, employees, suppliers and even
the government.
Consumers are generally aware regarding the issues of unethical practices that impact
the consumption and purchase of the products. If Electronic Arts does not listen to its
consumers and what they require, which leads to less stakeholders being interested in
the firm, therefore shaping EA into a very individualistic company that is not backed by
its consumers. This also means that people would be more interested in Blizzard than
EA, so they could switch from one company to another, therefore decreasing EA’s digits
in all departments, especially financially. Consumers have had a lot of complaints
regarding the ongoing Loot box lawsuits regarding their inclusion in the gaming industry.
The inability of EA to create an ideal gaming environment has severely affected its
customers that are looking forward for a devoid in the microtransactions completely.
In context of investors and shareholders, the issues of Loot box and gambling issues
directly impact their investment. The unethical practices have resulted in hefty fines paid
by EA to the Gaming authorities as they were unable to remove the gambling from the
FIFA versions. The government as a stakeholder looks forward to the interest of the
public as a whole and gets affected by the ethical requirements. The government is
focussing on the implementation of ethical practices and forced EA to adhere to more
ethical company standards. The UK government has been aiming to take regulatory
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actions against the Loot boxes in the FIFA games and other malpractices and is yet to
pass legislations.
Furthermore, stakeholders would be crucial for EA’s relationship development with its
customers, due to stakeholders being able to generate the constraints and requirements
for projects. This information would be crucial because it is based on the industry that
EA is in and will provide the company with an insight of what competitors are doing and
how to outperform them, while also satisfying the needs of customers. In addition, when
engagement levels are higher regarding stakeholders, you have more control over the
risks of the project that about to be carried out and it provides the company with more
information on what the customer needs are and how to meet their requirements.
Moreover, if in the process of carrying out a project, EA Games make a bad decision or
a controversial move, the stakeholders, specifically the shareholders and the investors,
would be put in a bad light, affecting their public image and therefore forcing them to
stop aiding the company. Consequently, it is in the company’s and the stakeholder’s
best interest to communicate effectively and satisfy customer needs in order to avoid
obstacles like that.
Moving on, I will now talk about the importance of ethical choices in the games industry.
"We as an industry do have a moral responsibility." Said the CEO of Lionhead Studios
and the creator of Fable and Black and White, Peter Molyneux. Furthermore, he stated
that any company that creates something for a large audience has responsibilities. Most
importantly, he outlined that companies should be careful with the lessons they teach in
their games, as many people will be experiencing them. Moreover, he carried on by
saying that the mindset ‘as long as it is fun, it’s okay’ holds no weight and should not be
used by developers; when a game is set in an artificial world or a fantasy world, and the
actions performed in the game cannot be performed in real life, the mindset could be
applied. However, when the game tries to imitate the world that we live in, and it
represents itself as a real world, then there are more aspects that need to be taken into
consideration. This is because in a game like Grand Theft Auto V, you can perform a
plethora of crimes ranging from stabbing civilians, to performing heists on banks,
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military buildings, etc. Moreover, Grand Theft Auto V portraits itself as a real world,
where you can buy houses, own businesses, drive around and other thigs that can be
performed in the real world; this means that GTA V is in a very grey zone because it
instigates violence and it teaches its audience things that can be performed in real life,
which are illegal (Dean Takahashi, 2020). Using our example, EA Games have been in
a lot of controversy recently regarding the pack opening system in FIFA 20 Ultimate
Team, a game mode where the user gets to pick and choose the players he wants to
play for his club. The incident started off when 2 lawyers in France sued Electronic Arts
arguing that the FUT (FIFA Ultimate Team) game mode should be classified as
gambling; the 2 lawyers, Victor Zagury and Karim Morand-Lahouazi, outlined that the
game mode is essentially pay-to-win, because users can just spend a lot of money on
buying packs in order to acquire good players, which then gives them an instant
advantage over someone that has spent little to no money. The client involved in the
lawsuit spent €600 in 5 months, and the best player he had packed was Greek centre-
back, Kostas Manolas which plays for Napoli and is 85 rated. An 85 rated player is
considered average, with the highest rating possible in the game being 99. He also said
that he became addicted to the pack opening system, and due to him spending that
large sum of money, he was behind with his rent. This tells us that the pack opening
system in the FIFA titles is very close to gambling and is highly addicted, which poses
as a risk for minors. (Adnan Riaz, 2020)
However, an example of a big positive impact on a company due to correct ethical
choices would be Nintendo. The company stated that as a global enterprise, they take
their international responsibilities very seriously and they always ensure that the
sourcing, labour and manufacture of the Nintendo switch and other products meets their
ethical policy standard. Furthermore, the company said that they are trying to inspire
other companies to follow in their footsteps in order to abolish exploitation around the
globe. (David Jenkins,2020).
It is important that EA adopts ethical business practices in regards to consumers such
as a non-violent approach in gaming, no discriminatory policies and gambling issues, by
avoiding real money transactions in the in-game, review their advertisements and
completely remove real money microtransactions from their existing games. The
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company also needs to adhere to the regulatory frameworks of the EU and the other
Gaming authorities effectively and be more transparent in their operations to establish
back its goodwill in countries like Belgium. The company can improve their
advertisements and imply the use of fair procedures through marketing. The company
can also train their staff in involving in ethical practices within the company to improve
the implementation of code of conduct in the organisation. A fair system of
communication has to be established where the investors and shareholders can learn
regarding the major practices, regulations and the change implementation in the gaming
model.
In conclusion, Electronic Arts Inc is surrounded by a lot of controversy regarding its loot
box system in games such as Battlefront 2 and FIFA Ultimate Team which transforms
games that are meant to be fun, into pay-to-win gambling games. Many examples have
been outlined in this report regarding proper ethical approaches such as the Lionhead
Studios CEO’s statement on how games should be structured regarding large
audiences. Furthermore, the management in EA has a lot of example to inspire itself
from, such as Nintendo’s approach to sustainable sourcing, which could improve the
public image of the company. In my opinion, I believe that the higher management at
Electronic Arts Inc. needs to pay more attention to stakeholders and fanbases, because
a lot of the issues that surround EA stem from fans that have invested a lot in certain
titles and suffered the consequences. EA could have a more open mindset, willing to
listen to ideas from stakeholders and customers, in order to avoid surprises and to limit
the amount of complaints regarding the games that are being released.
Section B
In this part I will analyse my chosen case study in comparison with 2 ethical theories of
my choice. In this part, I will take my chosen ethical theories and apply them to my case
study in order to help me view the case from a different ethical perspective. The 2
ethical theories that I have chosen are Utilitarianism and Egoism. Furthermore, these
theories will help me gain a deeper understanding of the ethical views of the case study
and determine whether the choices made by Electronic Arts Inc. are morally correct or
incorrect.
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To begin with, Utilitarianism is the ethical theory which makes the difference between
right and wrong and it is definite by the propose of doing for the greatest happiness for
the greater good(Jeremy B. 2007), It does so by concentrating on outcomes, rather
than methods. This theory is similar with consequentialism, which also focuses on the
outputs rather than the methods. Moreover, the theory states that the most good will be
generated to a large mass by the most ethical choice made, which ultimately means
that if the outcome of a project pleases the greater population, that means the right
ethical choices were taken. In the video game industry, utilitarianism applies when
game play alternatives are ranked based on their cost/benefit regarding their goodness.
In addition, a consequence of this could be the happiness that the player shows during
or after playing the game, which helps us link the utilitarianism theory to the video game
industry (Richter, 2010). Furthermore, we can use this a guide to apply the theory to
our chosen case study regarding the EA Games loot box system, gambling accusations
and ‘whales’.
The major advantages of the application of this theory is that it is universally
understandable and majority of the consumers, investors, shareholders and other
stakeholders believe in reducing personal harm and increasing happiness. The society
has been emphasized in dictating actions and this leads to creation of a common
ground. The practice is also secular and follows democratic principles. The process is
easy to use and uses an objective procedure to determine what’s wrong and right.
Moreover, the loot box system in games made by EA has been flagged as ‘gambling’ by
many people, including government officials and health specialists. If we apply the
utilitarianism ethics theory to this example, we can see that the consequence of opening
loot boxes is addiction, unsatisfaction and ultimately bad decision making. If we refer
back to the example used in part A with the FIFA player which spent €600 on the game
mode Ultimate Team, we can see that the user has experienced all 3 of the
consequences; he became addicted to opening packs, and over 5 months ended up
spending €600, he was very unsatisfied with the players that he had received from
opening the packs, which led him to the third and final consequence, bad decision
making. By spending €600, he was behind on paying his rent, which could ultimately
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lead to very serious problems such as homelessness, and even depression. (Nikky
B.,2020)
The major disadvantages of this theory that the society and customers not necessary
focus upon happiness when they make their choices. This theory has made all the other
goods consider a secondary value. The moral outcomes can majorly affect ow
customers and community behave. Happiness and satisfaction are subjective aspects
and the theory is describing outcomes that are immeasurable. The theory of
Utilitarianism is not concentrating on the act rather than the outcomes of the act. Apart
from that the theory explains that majority of the society dictate what’s right and wrong
which makes the current unethical practices acceptable, as many gamers might prefer
the gambling features. Consequently, utilitarianism can indeed be applied to our case
study, clearly showing the negative consequences of opening pack on FIFA Ultimate
Team. Furthermore, this tells us that the game is very unethical from this point of view
because it can lead to very serious health issues, and it can have an impact on the real
life of a person, being behind on rent as an example. Therefore, from a utilitarianism
point of view, the game is very unethical which would mean that it would be very poorly
ranked in cost/benefit. Lastly, the player in the example clearly did not show any
happiness as a consequence, and we know this because he sued Electronic Arts Inc.
which again show us that there are no positive outcomes out of pack opening, therefore
meaning the system is highly unethical. Furthermore, in this situation, the stakeholders
would be the losers and they would be affected by this because the public image of the
company has been stained, meaning the stakeholders and anyone else associated with
the company has also been put in a bad spotlight, therefore damaging public image.
This is also bad for the company because it means many stakeholders such as the
fanbase would stop supporting the company, making the creation of projects more
difficult for EA Games.
Moving on, we will now discuss our case study from the point of view of the ethical
egoism theory; Immanuel Kant argued that the principal fundament of morality is that
we cannot start an action if we cannot wish that in the same circumstances other
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individuals are behaving the same way. ethical egoism is a theory which states that the
prioritisation of one’s self is considered as moral.
The major advantages of this theory are that it encourages self-awareness and helps
the society in staying more productive by using higher levels of emotional intelligence,
empathy, and critical thinking in determining if the gambling is right or wrong for them.
Once the consumers, investors and other stakeholders believe that the unethical
business practices are morally wrong, they will aim at greater levels to reduce the
inclusion of such practices. The theory aims at personal improvement and there are less
chances of any manipulation. Furthermore, it outlines the need to prioritise one’s
interests and it states that it’s always moral to support them. In business, ethical egoism
is regarded to as making the choices which will have the most profitable impact on your
company; the theory states that a company must do anything in order to preserve its
best interests. In our case study, EA Games uses gambling mechanics and addictive
strategies in order to persuade people to spend more and more money in game, in
order to generate a greater revenue.
The major disadvantages of this theory are that it can result in self-centred society and
reduces the chances of communication. From an Egoism point of view, this method
would be incredibly effective due to its addictive nature which keeps the users hooked
in, making them spend more and more money. Ethically speaking this is not acceptable,
but from the Egoism point of view, EA Games put their own needs above the needs of
the consumers, leading to a very high amount of revenue, but a lower amount of
consumer satisfaction. Apart from that this theory instigates a breakdown in workplace
relationships and eliminates the idea of objectivity from the society. In this case, the
management of the company would be the winners alongside the shareholders because
they are still making a very high amount of money through the loot box system, pack
system, and through the wales that are pumping money into games. While the method
does work regarding revenue, there are a few drawbacks such as customer satisfaction
and poor customer feedback, which can lead to a decrease of buying EA products.
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PART 2
Ethical leadership management
Ethical leadership refers as a leadership that directs by respect for ethical beliefs
and morals and for dignity. In other word, ethical leadership means to set a high
standard for ethical behaviour and build a corporate culture which supports ethical
valuate i.e. honesty, trustworthiness, accountability and responsibility. This leadership
plays vital role in the workplace such as it supports company to uphold on commitment
and improves workforce integrity as well as organization’s value and standards. A
effective leadership theory needs to emphasize the organization’s values by making
ethics as a part of everything that firm does. Ethical leadership always needs a ethical
leaders because they know significance of ethical practices (Arslanb and Demirtaşc,
2016). If leaders of the company are ethical then they can ensure that all ethical
practices are prominently practices in the company or not. In modern world, ethics has
become important element and hot topic of discuss, so leaders with ethics are crucial to
understand, to develop and to identify in the business across the world (Lin and et.al.,
2020). To become successful business leader, it is important for the employer to learn
about ethical leadership. When employers have high understanding about role of ethical
practices in the company then they always ensure that all employees in the company
are following all laws of ethics while performing their different tasks in the workplace or
not. Ethical leadership is important for company for a variety of reasons i.e. for
customers, employees and the business an entire. While leadership skills are essential
to support develop a ethical culture in an organization. Leaders can support company to
make feel investors that the company’s culture is good and trustworthy one. In addition,
customers feels loyal when they see leaders follows ethical practices in the workplace in
the company. Partners and suppliers of the company also feel similarly then they can
trust and work with the company when they observe such leadership like that is ethical
displayed.
Short-term success, ethical leadership supports company to prevent scandals
through which company can get negative publicity from the customers in the business
which directly affects company’s image. It also supports company to gain more
13

customers and partnership that will ultimately bring more money at the end of the day
(Babalola, Stouten and Euwema, 2016). However, ethical leadership always
encourages employees to give honest performance in the workplace so, loyal
employees are also considered one of the essential elements for the long-term success
of a business. Ethical leadership is completely dependent on five key principles i.e.
honestly, justice, respect, community and integrity which supports a leader to become
an effective ethical leader. Ethical leadership puts people into management and
leadership positions who promotes and be an effective example of appropriate, ethical
conduct in the action and relationship in the job place. Most of the top of management
of companies pays high attention to the values that they set for the ethical behaviour of
staff in order to develop an ethical environment. It is quite common thing when company
follows all ethics in the company then they can recruit individuals for the designated
posts effectively and ensures them that no unethical practices are taken in the
workplace. The performance of the employees is a one of the essential elements of the
business success or failure. In that state ethical leader inspires and motivates and
uphold individuals to a specific standard of integrity as well as accountability (Ullah,
Hameed and Kayani, 2017). Management of ethical leadership always emphasizes on
keeping the teams’ moral high in order to boost employee’s performance. in addition,
ethical leaders always try to make the working environment effective in the workplace
which feels team valued, inspired and comfortable in the company. When a company
has good health working environment that ultimately enhance working efficiency of
individuals in the workplace.
In other case if company has unethical culture that means workplace is
completely plagued by drama, unhappy staff, arguments to the point that directly affect
productivity and well-being of the people in the company (Alwi, Ali and Nguyen, 2017).
In that state, ethical leadership management also is the solution to development of good
work culture in the company then it can sustain in the business market. If a company
undertakes unethical practices that often have to face negative publicity and
sustainability rate of the business also become minimize. So, it is important for the
upper management of the company to give prioritise development of a good work
culture instead of neglecting, However, this scenario ethical leadership can follow by
14

upper management and sets a standard of working for the staff that will develop ethical
culture in the workplace and influences individuals to give loyal performance in the job
place. Thus, unethical culture of the company will easily transform into good ethical
culture.
Analysis on maintaining integrity and compliance in an un/ethical business
environment
To maintain integrity and compliance ethical leaders needs to incorporate several
norms in the ethical business environment. for example when company already has
ethical culture environment then it become quite easy for the ethical leaders to maintain
integrity and compliance such as different stakeholders compliance can possible when
company keep it’s commitment and offers equal opportunity to gap generation and all
genders that automatically creates trustworthy relation between company and different
stakeholders. Upper management of ethical leadership always pays high attention on
their company’s culture to ensure that no ethical practices are taken by any employee or
by themselves as well which brings negative impact on company’s performance
(Michaelidou and Micevski, 2019). A ethical business environment always respects
employee’s and their works that makes them feel valuable part of the company. In
addition, management at ethical company involves all employees in meeting whenever
upper management is going to take any decision that leads integrity of workforce. As
know team-working always supports company to achieve it’s long-term goals and helps
company to stay long run in the business market. So, it is crucial for the ethical business
culture, always promotes teamworking and supports individuals at their situation that
brings integrity of workforce in the business. Compliance means when a person gets all
desires needs and gets respect from other that leads self-satisfaction in them for the
job. A company posses’ different stakeholders I.e. internal and external stakeholders.
Internal stakeholders include employees, management, suppliers, business owners etc.
directly affect company’s productivity and decision-making process while external
stakeholders are government, customers etc. which impacts on organization’s
performance. To get success in the business market it is important for the company to
bring compliance in all type stakeholders. It can possible when company stays on it’s
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commitment and be strict for unethical practices. So, ethical leadership management
always supports ethical business environment to maintain integrity and compliance.
On the other hand, when a company has unethical business environment then it
became quite difficult for the ethical leaders to maintain integrity and compliance. The
reason behind is that entire staff of the company follows unethical practices in the
workplace so when upper management directly follow ethical leadership and sets
ethical working standards then most of the employee will resist because all have
become use to for unethical practices (Kuenzi, Mayer and Greenbaum, 2020). But if
upper management works with management on ethical leadership then company can
develop ethical business environment in the company and treats all staff equally while
offering opportunity that will ultimately brings drastic change in their practices and
makes them honest for the working practices. In this state, company can maintain
compliance and integrity in the unethical business environment.
From the part 2 section, it can be concluded significance of ethical leadership
management for an un/ethical organization. it has been concluded about integrity and
compliance that required to maintain in an un/ethical business environment. in last this
section has been given brief about self-reflection journey which achieved through event.
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