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February 23, 2011

Apple Under FTC's Radar for In-App Purchases

By Michelle Amodio, TMCnet Contributor


The Federal Trade Commission has its eyes on Apple (News - Alert), particularly how it is marketing certain apps with “in-app” purchases.


In a letter written to Rep. Edward Markey (D-MA), FTC Chairman Jon Leibowitz (News - Alert) responded to a concern dealing with how Apple advertises in-app purchases in games to children. Parents who allowed their children to use their iOS devices were surprised to find that their credit cards had amassed large sums of money due to “accidental” purchases, such as tokens and other items used for game play.

The Washington Post broke the story about the in-app scheme, citing that popular games such as Smurf’s Village, were selling “pretend purchases” to kids while the little gamers were unaware of the real costs behind their supposed innocuous acquisitions.

"What may appear in these games to be virtual coins and prizes to children result in very real costs to parents. I am pleased that the FTC (News - Alert) has responded, and as the use of mobile apps continues to increase, I will continue to actively monitor developments in this important area," said Rep. Markey in a statement.

Leibowitz is looking into the matter.

"We fully share your concern that consumers, particularly children, are unlikely to understand the ramifications of these types of purchases. Let me assure you we will look closely at the current industry practice with respect to the marketing and delivery of these types of applications," said the FTC Chairman.

Recently, Apple was scrutinized for its new subscription service, one that has been labeled controversial, because developers must give Apple a 30 percent cut of their profits for their apps.

Apple reportedly places companies in a stronghold, prohibiting customers to go directly to a developer’s site from the app store. If app developers and publishers ignore these rules, they will not be allowed to offer their apps in the iTunes App Store.

The government “is looking at Apple's subscription service terms for potential antitrust issues but said there is no formal investigation. Speaking on the condition of anonymity because he was not authorized to comment publicly, the official said that the government routinely tracks new commercial initiatives influencing markets,” reported the Washington Post.

Apple has declined to comment on the matter at the time of the reports.


Michelle Amodio is a TMCnet Contributor. She has years of experience in business and marketing. Previously, she worked in broadcast journalism and as an editor abroad in London, England for a privately owned magazine. To read more of her articles, please visit her columnist page.

Edited by Tammy Wolf


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