The UK Office of Fair Trading (OFT) has launched an investigation into online and app-based games aimed at children. The focus will be on ‘free’ games and apps which involve additional paid-for content and are marketed at children. The investigation will consider whether these games and apps involve potentially misleading or aggressive practices.

What is the underlying issue?

There have been increasing reports of children incurring hundreds of pounds’ worth of charges through playing games which are, at least initially, free to play. These ‘freemium’ games are usually free to download and permit limited free gameplay. However, unlocking additional features, upgrades or speeding up play will often require purchases. These ‘microtransactions’ are an increasingly popular way of monetising games and apps.

However, the charges are often found in games that are targeted at children and some of the microtransactions are not so micro in nature. One example is Smurfs’ Village, which overtook Angry Birds as the iPhone’s top-grossing game, where players can purchase ‘wagonloads of Smurfberries’ for nearly £70 a wagonload. Another example is the My Little Pony app, where players can buy a ‘mountain of gems’, again for nearly £70. It can be very tempting and easy for children to accumulate significant charges when playing games on their parent’s device – like the child who bought £1,700 worth of ammunition for the game Zombies v Ninjas in just 10 minutes.

Although most platforms allow some form of password protection to be placed on in-app purchases, it seems that such protection is frequently not in place or is circumvented by children who know their parents’ passwords. This is leading to increasing complaints from parents regarding the charges, but also more pointed questions regarding whether freemium content aimed at children is immoral and should be prevented.

What is the OFT investigating?

The OFT is focussing its investigation on whether children are unfairly pressured or encouraged to pay for additional content on games and apps. In particular, the OFT press release states it will consider whether the games and apps are “misleading, commercially aggressive or otherwise unfair” or include “direct exhortations” which strongly encourage children to purchase additional content.

The legislation which underpins the investigation is the Consumer Protection from Unfair Trading Regulations 2008 (the Regulations). In particular, Regulation 3 prohibits commercial practices that are misleading, aggressive, materially distort the behaviour of consumers or fall below standards of professional diligence. Regulation 3 also prohibits certain listed practices which are deemed unfair, one of which is “including in an advertisement a direct exhortation to children to buy advertised products or persuade their parents or other adults to buy advertised products for them”. The extent to which freemium games and apps infringe these prohibitions will be considered by the OFT in its investigation.

What are the implications?

The Regulations create criminal penalties for breaches. These can lead to fines, imprisonment (for up to two years) or both. However, the OFT does not have the power to impose these penalties itself. Rather, it must request that a prosecution be brought before the courts. It is more common for the OFT to use its powers of investigation, then seek to educate or secure an undertaking from offending companies. In relation to this investigation, the OFT has said it “is not seeking to ban in-game purchases” and “no assumption should be made that any companies being investigated have broken the law”. It will, however, “take enforcement action if necessary”.

Outside of the implications under the Regulations, the OFT investigation may have a broader impact. It may encourage other regulators to look into the practices surrounding freemium games. Already the UK communications regulator, Ofcom, has published guidance for parents on how to prevent in-game purchases on their devices. If the OFT takes a strong line with its investigation, or other regulators begin to scrutinise the industry, it may necessitate a rethink of the freemium business model that has become increasingly popular.