Amazon, Google, Apple hit by Italian in-app purchases probe

Amazon, Google, Apple, and Gameloft are being investigated by Italy's competition authority over concerns that apps marketed as free to play needed in-app purchases to work.
Written by Raffaele Mastrolonardo, Contributor

Italy's Antitrust and Competition Authority is investigating Google, Amazon, Apple, and the French game developer Gameloft over allegations that the companies might have misled consumers by advertising apps as free when they required in-app purchases in order to keep playing the game.

The investigation, announced late last week, comes after the European Commission asked the "app industry" in February to be more careful in marketing "as free to download games which are not free to play", particularly when it comes to products that are aimed at children.

It's likely these moves will have an impact on in-app purchases which, according to figures quoted by the Commission, account for 80 percent of app makers' revenues.

In a letter sent to the four companies, the Italian watchdog said that they had offered "misleading and/or incomplete information about the actual costs required for a complete experience of the game".

According to the regulator, Google, Amazon, Apple, and Gameloft failed to give consumers clear information about "the presence within the app of purchase offers" and to explain in advance how to "limit those purchases through the payment system associated with a Google, Amazon, and iTunes account".

The antitrust authority said that Gameloft may also have sent in-game messages that "incite children to make purchases or to persuade parents to do it". In the case of Google and Amazon, one possible infringement of Italian consumer law is related to the fact that the companies allow users to choose not to enter their password each time an in-app purchase is made.

The companies now have 20 days to comply with the requests for information that came with the letter, and to respond with their defences to the allegations. If the alleged violations proved to be true, the three internet giants and the European game developer could each face a fine up to €5m — although the Italian watchdog told ZDNet that the punishment would be proportional to each company's size.

The whole procedure will be completed within seven months. Michele Baratelli, Gameloft's senior marketing manager for southern Europe & MEA, told ZDNet the company is investigating the matter internally and declined to give any further comment.

The antitrust and competition authority was prompted to act after having scrutinised an app called Littlest Pet Shop, which is available on Google Play, iTunes, and Amazon's App Shop.

The game, developed by Gameloft, targets children and can be downloaded for free. Within the app, though, users can buy virtual goods using two different in-game currencies called Bling and Kibble which, as well as being earned in the game, can be bought for real money via the internet companies' payment systems.

Given these characteristics, Littlest Pet Shop made a likely target for the antitrust authority after the European Commission's statement in February.

The position held by national consumer enforcement authorities across the EU on consumer protection in games apps, for instance, calls for a concerted effort in order to avoid "misleading advertising of games as free" and "direct exhortations to children to buy items in a game".

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