In-app purchases – searching for the right balance
By Simon Lerner
In-app purchases – searching for the right balance
8 Aug 2014 - Delany & Co

Stories of children incurring large bills to the horror of their unsuspecting parents are no longer a media staple. Focus from regulators has proved to be more persistent.

Earlier this year, the European Commission announced that it was undertaking a joint action across the EU on in-app purchases and published a “Common Position Paper” setting out the parameters for discussion. These centred on misleading advertising of games as “free”, advertising to children and consent for payment. The paper was characterised by some as an all out attack on the freemium-pricing model.

Platforms, namely Google and Apple, European consumer bodies and games associations all entered into dialogue. The ISGA took the lead in representing the social games sector.

In July, the EC announced a conclusion. Google was praised for adopting a series of new policy measures and Apple bore the brunt of criticism for not doing so. Whilst reassuring industry that in-app purchases are a “legitimate business model,” Vice President Neelie Kroes says more needs to be done to protect consumers, above all children.

New measures agreed to by Google include no longer advertising games as “free” when they include in-app purchases and requiring by default payment verification before each purchase.

In the same month, the UK advertising regulator, the Advertising Standards Association ruled that EA had misled customers in describing its game, Dungeon Keeper as “free.” The gist of the ruling was that the game was almost impossible to get any value out of without making purchases. In a subsequent interview EA mobile head, Frank Gibeau, apparently conceded that Dungeon Keeper had pushed the boundary a bit too far.

The ASA since published guidance on advertising apps and games as “free.” To paraphrase, the intention is not to ban the “free-to-play” label outright. However, if in-app purchases are unavoidable and non-paying users cannot have a meaningful game-play experience then developers need to be cautious.

Outside of Europe, the FTC continues to take on the major tech companies with what looks set to be a court-fought action against Amazon. The allegation is that Amazon took a reluctant and inconsistent approach to the adoption of passwords prompts for purchases. The result, the FTC says, has been millions of dollars of unauthorised transactions made in children’s games.

Amazon and Apple have hit back at criticism. Apple has highlighted its pioneering of parental controls, clear signposting of in-app purchases and development of a Kids section on the iOS App Store.

Amazon’s chief counsel, Andrew DeVore, echoes similar points and says the company has been constantly improving customer service in a fast changing space. Rather than pursuing litigation, he argues, government should be doing more to get behind industry led efforts like Kindle Free Time – a package enabling parents to comprehensively control the media their children engage with.

The balance between consumer preference and protection continues to lie at the heart of the debate. Delivering the keynote address at think tank TechFreedom, FTC Commissioner Joshua D. Wright re-iterated his cost-benefit case for dissent from the FTC’s complaint against Apple. Design changes may make some consumers better off by preventing unauthorised purchases, but it will inconvenience far greater numbers that benefit from ease of use on the Apple platform. Denying a seamless user experience can cause an instant loss of demand across highly integrated platforms.

For Wright, the Commission has impinged upon a legitimate “private firm’s decision” with potentially adverse consequences for tech markets which drive growth and welfare gains for consumers. In short, government intervention has done more harm than good.

Classic market liberalism may appeal less to European audiences. Wright does not dispute that there are a minority of consumers that have been caused harm. Some would argue efforts should be aimed precisely at protecting such vulnerable groups.

Interventionist or not, it does not seem controversial to suggest that we should expect some parental responsibility. In-app purchase controls have been improved substantially by platforms in the past year. They are there to be used. Widespread coverage must surely mean that most parents are conscious of the issue.

In the end, it is vital that a fair balance is achieved between functionality and protection. Failure to achieve either translates into hard done by consumers.

This article was featured in Social Casino Intelligence and can be found here.

Photo Credit: The Next Web