A string of news stories highlighting the ease with which children can spend hundreds of pounds in a free-to-download application - 'app' - has prompted the Office of Fair Trading (OFT) to launch an investigation.
It will look into whether children are being unfairly pressured into buying additional in-game features and content in free-to-download game apps.
The growing trend is for game apps to be designed this way. Indeed, a survey of the 100 top grossing apps from one app store revealed that 80 were free to install, then raised revenue through in-app purchases.
During its investigation, the OFT will collate information from consumer and parenting groups, game developers and app stores to identify and understand the business practices used in the app sector.
The investigation and its findings could have major implications for the tablet and smartphone app software development sector.
What will the investigation cover?
The OFT will look into:
- the cost transparency of such applications before they are downloaded
- whether the games are misleading, commercially aggressive or unfair
- whether it includes 'direct exhortations' to children - a strong encouragement to make a purchase, or to do something that will necessitate making a purchase
What the regulations say
Apps that are misleading as to their full cost before being downloaded could be in breach of the Consumer Protection from Unfair Trading Regulations 2008 (Regulations).
These lay out the criteria for establishing whether a commercial practice is unfair, which includes being aggressive or a misleading action.
The Regulations also provide that including in an advertisement a direct exhortation to children to buy advertised products or persuade their parents or other adults to buy advertised products for them will, in all circumstances, be considered unfair.
Possible recommendations from the investigation
Legal regulation of this industry is a possible answer, but there is already debate among consumer groups about how a UK regulatory framework would sit, since this is a global sector, with apps sold worldwide through myriad app stores.
So, what can developers whose app is potentially in breach of the Regulations expect? Well, whilst the OFT does have the power to pursue both civil and criminal actions, the preferred approach is to accept an undertaking from the non-compliant business to rectify the unfair term or trading practice.
This may seem a less heavy handed approach, but it could still mean the overhaul of a developer's business model, changing how they gain revenue for their work. Alternatives to an undertaking are to impose a fine or an obligation on the developer to repackage its
What happens next?
The OFT has made it clear that it 'is not seeking to ban in-game purchases, but the game industry must ensure it is complying with the relevant regulations so that children are protected'.
The next steps of the investigation are due to be published by October 2013 and, in the meantime, the OFT has made it clear that 'no assumption should be made that any companies being investigated have broken the law'.
Whilst awaiting the outcome of the investigation, the executive director of Which? has encouraged parents to change default settings to ensure passwords are required for all in-app purchases.