The European Commission is on its second day of hosted talks—attended by Apple and Google—about the models for selling mobile apps.
While the EC is pleased about Europe's "booming" app economy, which employs more than a million people and is expected to be worth about $87 billion in the next five years, it finds the popular model of offering an app for free but including in-app purchases—a model referred to as "freemium"—to be problematic.
Today, more than 50 percent of the mobile gaming apps in Europe are freemiums.
"Often customers are not fully aware that they are spending money because their credit cards get charged by default. Children are particularly vulnerable to marketing of 'free to download' games which are not free to play," the EC said in a Feb. 27 statement, adding that it has received complaints on the matter "from all over Europe."
EU Justice Commissioner Viviane Reding said in a statement that the apps industry has "enormous potential" and improves people's lives every day. However, she said, "For the sector to deliver on its potential, consumers must have confidence in new products. Misleading consumers is clearly the wrong business model and also goes against the spirit of EU rules of consumer protection."
EC Commissioner Neven Mimica added that the EC and national enforcement authorities are discussing with industry representatives how to address an issue that causes financial harm to consumers and puts the credibility of a "very promising" market at stake.
"Coming up with concrete solutions as soon as possible," said Mimica," will be a win-win for all."
Mobile Apps and Controls
This isn't the first time that governing bodies have called Google and Apple into conversations about their mobile app policies.
In February 2013, the Federal Trade Commission (FTC) issued a report recommending ways for Apple, Google, Amazon, BlackBerry and Microsoft to keep consumers better apprised of the companies'—or their partners'—data-collection practices.
A 2012 FTC study of the 400 most popular applications for children found that 59 percent of the apps were transmitting user information—sometimes even geo-location and a phone number—though only 11 percent of the apps included a privacy disclosure stating so.
The FTC has also come down on Apple for not being clearer about in-app purchases. In January, Apple agreed to pay $32.5 million to settle a complaint with the FTC that said Apple had violated the FTC Act by failing to make clear to parents that by entering their Apple ID to download an app, they were also leaving open a 15-minute window during which kids could make in-app purchases.
In one of the more hair-raising examples offered, a woman said that her daughter had spent $2,600 playing an app called "Tap Pet Hotel."
The MEF, a global trade association, has also called for more transparent and consumer-friendly practices from the mobile app community.
The EC, in the statement on its discussions, said the industry will be asked to "commit to providing solutions within a clear timeframe so as to ensure proper consumer protections for apps customers."