Apple faces threat of legal action over ‘in app’ payments for apps that were marked "free"

Last updated: July 18, 2014 5:41 pm
Apple faces threat of legal action over ‘in app’ payments

By Murad Ahmed, European Technology Correspondent

Apple may face legal action in Europe over claims that it has not done enough to stop children making “in app” purchases through mobile apps, in the latest sign that the continent’s authorities intend to put Silicon Valley companies under greater scrutiny.

The European Commission has released its latest findings into the policies of Apple, Google and other digital companies regarding in-app payments on mobile devices. A probe into the issue was sparked last year after regulators received a “large number of complaints in EU countries”, mainly about purchases made by children playing games on apps without their parents’ consent.

The commission is demanding a number of concessions on the matter. These include: agreeing that any app that features an in-app purchase is not marked “free”; doing more to ensure app makers do not make “exhortations” within apps that encourage children to make payments; providing clearer information about who can consent to a payment; and making it easier for adults to find a company’s contact details to make complaints over inadvertent in-app payments.

The demands highlight how California’s technology groups are facing a tougher regulatory regime across the Atlantic, with European authorities appearing to be more sceptical of their privacy policies and business models than US regulators.

The commission’s findings have been presented to individual member states, with each nation’s consumer protection watchdogs tasked to decide how to respond. The Danish Consumer Ombudsman is the first group considering legal action over the issue, according to people close to the matter.

In January, Apple reached a settlement with the US Federal Trade Commission over a similar inquiry, agreeing to refund customers at least $32.5m spent on in-app purchases by children without parental consent. The FTC this month also sued Amazon over the same issue.

People familiar with the commission’s thinking suggested that Apple’s response to the probe had been “opaque”, with the company refusing to commit to specific solutions in a defined timeframe. This was in contrast to Google, which has given detailed proposals on changes to its Play store, which sells apps for Google’s Android software, as it sought to comply with the commission’s demands.

Among the issues regulators have highlighted is a default setting within Apple’s app store where, after a payment is made, there is a 15-minute window allowing purchases without requiring a password. The company also allows apps to be displayed as “free”, with only smaller wording nearby to indicate “in app purchases”.

By contrast, Google is implementing changes such that users are prompted to choose precisely when passwords need to be entered for in-app purchases. Also, Google has removed the word “free” from all apps that may be free to download but feature in-app payments. These changes appear to have satisfied the regulators’ demands.

Apple said it has already made a number of changes to its app store that deal with the issue. “We made sure any app which enables customers to make in-app purchases is clearly marked,” the company said.

It has also created children’s section with even stronger protection, and said it would continue to work with European regulators on the issue. “These controls go far beyond the features of others in the industry,” it said.

Neelie Kroes, the commissioner responsible for Europe’s digital agenda, said: “The commission is very supportive of innovation in the app sector. In-app purchases are a legitimate business model, but it’s essential for app-makers to understand and respect EU law while they develop these new business models.”

Google said: “We’ve been working closely with the European Commission and consumer protection agencies for the last few months to make improvements to Google Play that will be good for our users and provide better protections for children.”

Copyright The Financial Times Limited 2014.


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