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Google Play, Apple’s App Store Might Face “Legal Undertakings” In OFT’s Investigation Of Freemium Games For Kids

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The freemium kids’ app party that has seen some parents left with hefty bills because of their kids’ use of games could be heading for a sticky end — at least in the U.K. The Office of Fair Trading has announced a six-month investigation into whether children are being “unfairly pressured or encouraged to pay for additional content in ‘free’ web and app-based games”.

The OFT says in a press release that it cannot identify the companies that are subject to investigation but a spokesman confirmed to TechCrunch  it is contacting Apple and Google as part of this process — being the proprietors of the two largest app stores: the iTunes App Store and Google Play.

Once the investigation has concluded — and if the OFT is  unhappy with what it learns and the discussions it’s had — the spokesman said it “can seek legal undertakings from court”.  Companies subsequently ignoring any court directions could face “an unlimited fine”, he added.

The OFT is concerned that developers are designing children’s content to deliberately encourage kids to make payments after the initial free download/access. It’s not citing any examples or naming any problematic apps at this point but it’s not hard to find instances that are likely to have triggered the investigation — such as the five-year-old British boy who accidentally made in-app purchases totalling £1,700 in 15 minutes playing  Zombies vs Ninja. Or the British six-year-old girl who amassed a £900 bill in half an hour on the My Little Pony app.

The OFT points out that “direct exhortations” (ie strong encouragement) to children to make purchases themselves, or ask another adult to do something that results in a purchase, are unlawful under the Consumer Protection (from Unfair Trading) Regulations 2008. The sort of in-app purchases that might fall foul of the regulation could include membership, virtual currency/rewards, additional levels, faster gameplay and additional game features, it added.

The OFT said it has written to companies that are offering free web or app-based games asking for information on in-game marketing to children. It is also asking for parents and consumer groups to contact it with information about “potentially misleading or commercially aggressive practices they are aware of in relation to these games”.

The spokesman said the aim of the investigation is to get more “clarity” about the digital market for kids’ games, and the sorts of behaviours/mechanics apps are utilising, by talking to games developers, app stores, parents and consumer groups.

The investigation will also specifically consider whether the full cost of games aimed at children is being made clear when they are downloaded/accessed. “The information [gathered during the investigation] will be used to understand business practices used in this sector, to establish whether consumer protection regulations are being breached and if so what the consumer harm is,” the OFT said today, adding that it “expects to publish its next steps by October 2013″.

Commenting in a statement, Cavendish Elithorn, OFT Senior Director for Goods and Consumer, added: “The OFT is not seeking to ban in-game purchases, but the games industry must ensure it is complying with the relevant regulations so that children are protected. We are speaking to the industry and will take enforcement action if necessary.”

The  spokesman stressed that the OFT hopes to be able to solve any issues uncovered through “conversations” with the various companies involved — including Apple and Google — rather than taking the court route . “We hope this is going to be resolved by talking to the big companies,” he added.

Google declined to comment on the investigation when contacted by TechCrunch.

At the time of writing Apple had not responded to a request for comment.

Both Google’s and Apple’s app stores require developers to sign developer agreements in order to successfully submit apps, and both have been known to remove content that violates these developer guidelines — so app stores are already in the app policing business.

Google’s Play Store developer guidelines include the following (vague) stipulation, for instance, that could potentially be used to boot freemium kids’ apps that are misleading about the potential costs:

Developers must not mislead users about the applications they are selling nor about any in-app services, goods, content or functionality they are selling.

Apple does more policing of its store than Google, with iOS developers required to submit apps for approval prior to publication on the store. “We review all apps to ensure they are reliable, perform as expected, and are free of offensive material”, Apple notes on its developer site,  warning app makers to: “Before submitting your new or updated apps for review, check out the latest App Store Review Guidelines and Mac App Store Review Guidelines.”

There are  also signs that Cupertino has been looking more closely at some of the problems posed by having kids interact with apps. Earlier this month it relocated age ratings from the bottom of app listings on its store, to the top near the title where they are easier for parents to spot.

This change is likely to have been triggered by concerns about apps powered by user-generated content that can contain adult material appearing in the app store where children could find them — such as Twitter’s Vine video app — rather than specifically helping parents prevent kids making in-app purchases.

Here’s the OFT’s summary of the investigation:

Many children’s web- and app-based games are free to sign up to or download.  Some of those games give players the opportunity to ‘upgrade’ their free accounts through paid-for membership, providing access to parts of the game not available to non-paying players. Others encourage in-game purchases to speed up gameplay or to give access to extra game features.

The OFT will look into whether those children’s games are in line with the Consumer Protection (from Unfair Trading) Regulations 2008 to ensure that any commercial practices they include are not misleading or aggressive. In particular, the OFT will consider whether children’s web- and app-based games directly encourage children to buy something or to pester their parents or other adults to buy something for them. [see note 1]

The OFT will gather information on this issue for the next six months and is interested to hear from businesses operating in the market and mobile app platform operators. The OFT will also consult with relevant UK and international regulators.

The OFT is also keen to hear about potentially misleading or commercially aggressive practices experienced by parents whose children play these games, and also from consumer groups with an interest in this area.

note 1: The Regulations, under Annex Practice 28, prohibit advertisements from including direct exhortations to children to buy something or to ask their parents or other adults to buy something for them.