Consumer Mistrust Could End Booming App Sector, European Commission Says
The app industry is misleading consumers, the European Commission said Thursday. It and national consumer protection authorities were scheduled to meet Thursday and Friday with app developers such as Google and Apple to address consumer complaints “from all over Europe,” it said. The EU market for online and mobile games and applications is vibrant but consumers are griping about such things as games advertised as “free” that aren’t, and receiving default credit card charges, it said. The sector has “enormous potential” to generate jobs and growth, but not if consumers lack confidence in the products, said Justice Commissioner Viviane Reding. Despite the concerns, however, the U.K. Office of Fair Trading (OFT) told us that app developers are making progress on the issues. The European Consumer Organisation (BEUC) said it should be at the table as well. European software developers agreed to further talks.
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Europe’s “app economy” is booming, employing more than a million people and expected to be worth 63 billion euros ($86 billion) in the next five years, the EC said. App analytics platform Distimo estimated that around 80 percent of the revenue of one supplier comes from purchases made by consumers within an application by which users access special content or features, called “in-app” purchases, the commission said.
The EC is specifically concerned about four issues, it said: (1) Games touted as “free” often mislead consumers about the true costs involved for in-app purchases. (2) Many games urge children to buy items or persuade adults to buy things for them. (3) Consumers are often inadequately informed about payment arrangements and purchases are debited though default settings without buyers’ express consent. (4) Companies don’t provide email addresses so customers can contact them. National consumer protection authorities agreed on a common legal position on these issues in a statement on practices related to online games (bit.ly/1dEvrnO).
"This is a meeting at a technical level” where EC legal experts and national enforcement authorities will explain their legal concerns to industry representatives, Reding spokeswoman Mina Andreeva told us. It will then be up to the companies, which include Google and Apple, to look into the matter and come up with adequate solutions, she said. “I expect this to take at least 1-2 months,” she said.
OFT is one of the regulators in the Consumer Protection Cooperation network taking part in the talks, as are enforcement agencies from Belgium, Denmark, France, Italy, Lithuania and Luxembourg. On the industry side, in addition to Apple and Google, the Interactive Software Federation of Europe (ISFE) is participating, the EC said.
OFT has led the way on the issues, a spokesman told us. Last year it began investigating app producers to see if children were being pressured to buy things, he said. The probe dredged up a range of problems, prompting the office to draft a set of principles for online and app-based games that was published Jan. 30 (http://xrl.us/bqn8x8). U.K. app developers were given two months to get their house in order, the spokesman said. OFT made sure that the principles were applicable to laws in other jurisdictions because it wants to help raise standards globally, he said. The office is pleased about the progress made in the past eight to nine months, but there’s still room for improvement, the spokesman said.
After a “positive meeting,” ISFE agreed to engage in a dialogue on in-app purchases, a spokesman said. The organization “believes that safeguards must be provided for consumers within a legal framework and that although the vast majority of gamers are not affected, ISFE acknowledges that there are concerns relating to a number of individual cases, most of which are now resolved,” he told us. Apple and Google didn’t comment.
BEUC welcomed the interest the EC and national regulators are taking in tackling common problems with apps because that will lead to a more coherent application of consumer law throughout the EU regardless of the device or technology. However, when new rules and guidelines are developed, consumer organizations should be included along with authorities and industry as they are usually the first to collect and handle complaints, a BEUC spokesman said.