FTC Asked to Investigate "In-App" Sales Practices

March 2011

A recent report in The Washington Post spurred several members of Congress to ask the Federal Trade Commission (FTC) to investigate whether companies are engaged in deceptive trade practices by allowing children to make "in-app" purchases using mobile phone applications downloaded for free.

The article cited several mobile applications popular among young children in which "in-app" purchases (which the children mistakenly believed to involve only "computer money") actually were real purchases involving real dollars-sums which later appeared on the parents' iTunes account. One 8-year-old reportedly ran up a $1,400 iTunes bill on Capcom Interactive's Smurfs' Village (by buying Smurfberries), and another ran up a $150 charge on Pocket Gems' Tap Zoo. The issue is not limited to Apple apps; Google recently began allowing similar applications for Android phones.

Legislators' Request

In response, Rep. Ed Markey (D-MA) and Sens. Amy Klobuchar (D-MN) and Mark Pryor (D-AR) have asked the FTC to investigate current industry "in-app" practices "to determine whether they constitute unfair or deceptive acts or practices." Rep. Markey also asked for information regarding "any actions" that the FTC had already taken to investigate the matter.  He went on to encourage the FTC to advocate "measures to provide consumers with additional information about the marketing and delivery of these applications."

The matter seems likely to attract the FTC's interest.  In the past, the FTC has investigated business practices that involve either unauthorized charges or that appear to take advantage of children, and the Commission already is well into a review of related issues involving children's privacy and mobile applications.

As mobile applications become increasingly popular, regulatory attention will increase as well.  All providers in the mobile app ecosystem-including carriers, device manufacturers, makers of mobile operating systems and application authors-will need to be mindful of e-commerce and privacy risks (and opportunities) as this new platform continues to grow.

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