In-app purchases: no more “free” downloads?

ADVISORY | DISPUTES | TRANSACTIONS
In-app purchases: No more
“FREE” downloads?
19 November 2014
“Five-year-old runs up £1,700 iPad bill in ten minutes!”. It’s headlines like these which have been getting
regulators across Europe hot under the collar about the use of “Free to Play” branding for online and appbased
games which offer in-app purchases. The industry is now reacting, and games developers need to
think pretty quickly about how they respond. It could even signal the end of what many perceive to be the
gateway to online entertainment, namely the FREE download button.
The fact is that “Free to Play” games which
offer in-app purchases are now a regulatory
hot potato across Europe. But shouldn’t
games developers be free to use “free” for
games which don’t necessarily mean you
need to spend a bean to play them, even
with the odd “buy” pop-up? Or is it all just
a cynical ploy to draw us into expensive
in-app purchases?
This article looks at recent regulatory
developments in the UK and Europe over the
“Free to Play” branding furore, and examines
whether (as ever) it’s industry rather than the
regulators which is setting the digital agenda.
The OFT kicks off
In 2013, the Office of Fair Trading (OFT)
launched its market investigation into the
ways in which online and app-based games
encourage children and other users to
make in-app purchases. This investigation
concluded in January 2014 with the
publication of the OFT’s Principles for online
and app-based games (the Principles), as now
adopted by the Competition and Markets
Authority (CMA).
The Principles clarify the OFT’s (and now
the CMA’s) view of the games industry’s
obligations under consumer protection law
and provide guidance on what industry can
do to avoid being the subject of targeted
enforcement action.
A key message from these Principles is
one of transparency of costs (the First
Principle). In particular, information about
in-app purchases should be clear before a
consumer downloads a game. For example,
a game unlikely to comply is one where “the
consumer cannot play the game in a way that
he/she would reasonably expect, given the
information provided up front”.
Similarly, other material information about
the game and information about the
business (including contact details) should
be provided clearly, accurately, prominently
and up-front, before the consumer begins
to play, download or sign up to the game or
agrees to make a purchase. The Principles
make it clear that games should not mislead
consumers by giving the false impression
that payments are not required if that is not
Any comments or queries
Oliver Bray
Partner
oliver.bray@rpc.co.uk
D +44 (0)20 3060 6277
Susan Perkins
Associate
susan.perkins@rpc.co.uk
D +44 (0)20 3060 6034ADVISORY | DISPUTES | TRANSACTIONS
19 November 2014 In-app purchases: No more “FREE” downloads? 2
the case, should not use practices which are
aggressive or exploit children’s inexperience,
vulnerability or credulity and should not
directly exhort children to make purchases or
persuade others to make purchases for them.
Finally, payments should not be taken from
the account holder unless authorised and
details of what constitutes valid authorisation
is given.
The ASA picks up the ball
The Advertising Standards Authority (ASA)
next entered the fray through its recent ruling
on an e-mail ad by EA Games for its mobile
app game “Dungeon Keeper” (July 2014).
The ad claimed that the game was free and
also featured a screenshot of the game
which appeared to show a well-developed
dungeon. The complainant argued that the
ad was misleading, because whilst the game
was free to download, gameplay was severely
limited unless in-app purchases were made.
EA Games disagreed on the basis that all of
the content and activities identified in the
ad could be achieved by players who engage
with the game for free by using the in-game
currencies. EA Games also mentioned that the
availability of in-game purchases was stated
in the product description for the game and
explained during the game.
The ASA recognised that the game was
available to download for free and that it was
possible to play the game without spending
money but held that “players would reach a
position where they would be unable to take
any further meaningful or progressive action
in the game until a timer had finished or
been skipped, and that these periods would
become longer and more significant, and the
cost of skipping increasingly higher, as the
player progressed”, and hence “many players
would regard the gameplay experience as
unexpectedly curtailed and as a result would
need to spend Gems in order to achieve the
form of gameplay anticipated”.
The ASA concluded that the ad should have
made clear what consumers could expect
from the free elements, that in-app purchases
would have a significant impact on gameplay
and that consumers would not expect the play
experience of a game described as “free” to
be excessively restricted. Because the game
had the potential to restrict gameplay beyond
that which would be expected by consumers
and the ad did not make this aspect of the
role of the in-app purchasing clear, the ASA
concluded that it was misleading.
Although the ASA acknowledged that a timer
mechanism could be a legitimate part of
gameplay experience, the nature of the timer
frequency and length in Dungeon Keeper, in
combination with the way it was monetised,
was likely to create a game experience for
non-spenders that did not reflect their
reasonable expectations from the content of
the ad. As such, the ad was misleading and
breached the UK Code of Non-broadcast
Advertising, Sales Promotion and Direct
Marketing (CAP Code). The ASA required EA
Games to ensure that future ads make clear
the limitations of free gameplay and the role
of in-app purchasing with regard to speeding
up gameplay.
CAP enters the game
The EA Games ruling prompted an advice
note from the Committee of Advertising
Practice (CAP) on Free Claims: apps & games
(published 10 July 2014). The note explains
that ads must not mislead or be likely to do
so, and that the ASA will take into account the
impression created by the ad overall as well
as specific claims within it and will rule on the ADVISORY | DISPUTES | TRANSACTIONS
19 November 2014 In-app purchases: No more “FREE” downloads? 3
basis of the likely effect on consumers, not the
marketer’s intentions. Ads must not mislead
by hiding material information or presenting
it in an unclear, unintelligible, ambiguous or
untimely manner. More specifically:
• the fact that a game is possible to play
without spending money, is not enough
in itself for the game to be classed as
“free” if that gameplay is then limited to
the extent that it no longer provides a
meaningful game experience. Nor is it
enough that the free gameplay will include
some of the content featured in the ad –
if a game is described as “free” then the
ad should reflect the experience of the
non-paying user. If some aspects can only
be realistically enjoyed by paying, then this
should be made clear in the ad.
• whilst time-gated boosters or levels are
not a problem in themselves, if the player
is unable to take meaningful or progressive
action for a significant period of time
without using so many resources that
in-app purchases would be inevitable, it
should be clear that payment is required to
skip them. The ASA is unlikely to consider
“waiting” to be “playing”, but unlocking
content through gameplay is likely to be
considered in a different light to unlocking
content by simply waiting for time to pass.
Advertisers are advised that the extent of the
explanation in the ad will depend on what
is depicted. If all the gameplay described in
the ad is available for free and there is no
monetised bar to advancement then “free” is
unlikely to require qualification. If timers are
involved to unlock content then wording such
as “in-app purchases can be made to speed up
gameplay and skip timers” may be necessary.
What the EA Games decision means
for games developers
Essentially, offering in-app purchases is not
inherently problematic, but placing undue
restrictions on the basic game play unless
these purchases are made is likely to be an
issue. So while the ASA does not ban the
use of the word “free” in ads for games that
are free to download, if in-app purchases
significantly improve user experience, or
failure to make an in-app purchase detracts
from user experience, then the role of such
purchases should be made clear in the ad.
In light of the above, games developers
advertising in the UK should:
• review each game to determine whether
in-app purchases have a significant impact
on gameplay,
• if enjoyment of the game is curtailed
without paying then consider what
fundamental aspects are affected and
prepare an appropriate disclaimer, and
• create disclaimer wording on a case by
case basis, rather than simply relying on
“game contains in-app purchases”.
Europe takes the lead
The Consumer Protection Co-operation
Network (CPC) is the network of enforcement
authorities across the EU’s member states.
Its responsibility is to ensure that each state
is complying with European consumer law.
CPC recently reviewed “free to play” games
following a large number of complaints about
in-app purchases in online games (especially
by children). Working with the European
Commission, it asked Apple, Google and
associations of online game developers (ISFE)
to propose solutions to identified problems
with in-app purchases. Specifically, CPC
asked that:
• games advertised as “free” should not
mislead consumers about the true costs
involved,
• games should not contain direct
exhortation to children to buy items in a
game or to persuade an adult to buy items
for them,ADVISORY | DISPUTES | TRANSACTIONS
19 November 2014 In-app purchases: No more “FREE” downloads? 4
• consumers should be adequately informed
about the payment arrangements for
purchases and should not be debited
through default settings without
consumers’ explicit consent, and
• traders should provide an email address so
that consumers can contact them in case
of queries or complaints.
But it’s the platforms who dictate
the rules
On 18 July 2014, the European Commission
published the solutions proposed (or not) by
Apple, Google and ISFE. While this is clearly an
emerging situation, it seems that:
• Google will no longer use the word “free”
when games contain in-app purchases
and that it is also developing targeted
guidelines for its app developers to prevent
direct exhortation to children. These
changes are expected to be completed by
the end of September 2014
• Apple now displays the text “In-App
Purchases” near the download button for
“Free to Play” games and offers consumers
information about potential costs for the
10 most popular in-app purchases for each
online game. CPC noted, however, that
the font of the text “In-App Purchases” is
considerably smaller than the word “FREE”
and may be difficult to read on smaller
screens. It also reminded Apple that an
online game should not be marketed as
“free” where the consumer cannot, without
making in-app purchases, play the game in
a way that he/she would reasonably expect.
In light of pressure from CPC to have a
mechanism for consumers and competent
authorities to notify such illegal activity (such
as direct exhortations to children):
• Apple intends to create a specific email
address for enforcement authorities to
inform it about possible violations of
applicable law and coordinate discussions
with the app developers concerned, and
• Google has implemented a dedicated
email address for CPC and the European
Commission to report to it breaches of
EU law appearing on its platforms. Google
has also undertaken to act swiftly when
a non-compliant game is brought to its
attention. This includes the immediate
review of each complaint and, as
appropriate, either to contact and warn
the trader concerned or to directly take
down the infringing app. Google will ban
traders who commit serious or repeated
breaches, in particular breaches of the ban
on exhortations to children.
Furthermore, under the Consumer Rights
Directive (2011/83/EC), consumers must
be clearly informed about payment
arrangements and provide their explicit
consent to such payments. CPC stated that
Apple’s default position of providing a 15
minute payment window to consumers is
not satisfactory, and that consumers “must
be able to choose between this setting and
a setting requiring authorisation of each
purchase individually”.
More positively, Google is implementing
changes which will allow consumers, at the
moment of the first payment on a device, to
choose between three settings:
• a password requirement for every purchase
(including in-app purchases),
• a password requirement every 30 minutes,
or
• no password requirement at all. ADVISORY | DISPUTES | TRANSACTIONS
19 November 2014 In-app purchases: No more “FREE” downloads? 5
CPC also suggested that consumers could
be given the option of setting a maximum
amount for in-app purchases made without
individual payment authorisation.
While CPC’s assessment marks the formal
end of the joint enforcement action, the
Commission and the CPC say they will now
“monitor how the mechanisms proposed
by the companies have been introduced
and function”.
Comment
The measures published by CPC and the
European Commission do not change the law,
but their steps are leading to the adoption
of a wider common position across the EU,
particularly via the major platforms.
The broad aim clearly remains that games
advertised as “free” should not mislead
consumers about the true costs involved.
But it’s going to be hard for the platforms
to determine which games can and cannot
be marketed as “free” when the real test is
whether a consumer can, without making
an in-app purchase, play the game in a way
he/she would reasonably expect. It follows
that this may well indeed be the death-knell
for the FREE download button for all games
with in-app purchases – and that could just
be the start… in other words, will any app
with an in-app purchase come under scrutiny
if it is advertised as “free”. Consider an app
like “Paper” which lets you draw on an iPad
using a virtual “pen” and “paper”. But if you
want to experience the full functionality of
the app (eg by painting with a “brush”), you
have to pay for it. At what point does this
app reach the tipping point so that (like appbased
games) it becomes one which can no
longer be described as free because in reality
it requires in-app purchases to achieve its
full functionality?
Put simply, apps are not going to be able to be
marketed as “free” where the consumer would
reasonably expect paid-for elements to form
part of its offering – a difficult judgement call
for app developers and online platforms alike,
who are likely to err on the side of caution and
move away from blanket “free” references.
Enjoy the FREE download button while you
still can…
This article was first published by Sweet
& Maxwell in Entertainment Law Review,
Volume 25, issue 8 and is reproduced by
agreement with the Publishers.
The information and opinions
provided in this article should
not be relied upon, or be
used, as a substitute for legal
advice on how to act in a
particular case.Tower Bridge House
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