Apple should do more to tackle in-app purchases problem: EU

BRUSSELS Fri Jul 18, 2014 7:20am EDT

A woman poses for a photo illustration with an iPhone as she plays Candy Crush in New York February 18, 2014.   REUTERS/Carlo Allegri

A woman poses for a photo illustration with an iPhone as she plays Candy Crush in New York February 18, 2014.

Credit: Reuters/Carlo Allegri

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BRUSSELS (Reuters) - Apple has provided no concrete and immediate solutions to tackle the problem of adults and children racking up credit card bills by making "in-app" purchases on tablets and mobile phones, the European Commission said on Friday.

Following concerns raised by consumer groups in a number of European countries, the EU executive called in industry members, policymakers and consumer protection authorities to discuss clearer guidelines in February.

Since then, Google, which owns the Android operating system for smartphones, has proposed a number of measures that are being implemented. These include banning the word "free" when games contain in-app purchases and changing the default settings so that payments have to be actively authorized before every purchase.

But the Commission regretted that Apple, maker of iPhone, had not made any firm commitments on tackling the issue of payment approvals.

"No concrete and immediate solutions have been made by Apple to date to address the concerns linked in particular to payment authorization," the Commission, the EU executive, said in a statement.

Many of those playing the games are children or teenagers, who can often make the in-app purchases without parental approval. It is then up to the parents to foot the bill.

Industry members, including Apple, could face legal action from national authorities if they are deemed to be breaking EU consumer protection law.

Apple said it would address the concerns brought up by the Commission, although it gave no time frame for when it might make the changes, the EU executive said.

"Over the last year we made sure any app which enables customers to make in-app purchases is clearly marked," said an Apple spokesman. "We will continue to work with the EC member states to respond to their concerns."

BOOMING APP INDUSTRY

The app industry in Europe is huge and growing. It employs more than 1 million people and has annual revenue of around 10 billion euros ($13.53 billion), of which about 80 percent comes from in-app purchases, according to the Commission.

National authorities will continue to engage with Apple to ensure that it addresses the concerns they brought up in December last year.

While the company has not met their demands on payment consent, it has introduced clearer labeling on its iTunes store when apps marketed as free also offer in-app purchases. It has also proposed creating a specific email address through which enforcement authorities can contact it about possible breaches of EU law and discuss the problem with the app developers.

The Commission estimates that over half of the EU online games market is advertised as "free" despite carrying hidden costs.

"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," said Neelie Kroes, the EU's telecoms commissioner.

In one case in Britain, an 8-year-old girl managed to run up a bill of 4,000 pounds ($6,700) making "in-app" purchases from games such as My Horse and Smurfs' Village. In that instance, Apple reimbursed the girl's father.

In-app purchases can be disabled on most mobile devices.

($1 = 0.7391 Euros)

(Editing by Mark Heinrich)

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