Game App: The Italian Competition Authority investigation of allegedly unfair commercial practices


November 24, 2014 Leave a comment
On May 16th 2014, the AGCM, the Italian Competition Authority (“ICA”) has launched an investigation against Google, Apple, Amazon and other entertainment companies in order to verify whether their conducts concerning an APP advertised as “free” can be regarded as unfair commercial practices. The object of the probe is an app-based game for children for Apple’s iOS and Android devices, and available for purchase on Google’s Play, Amazon’s App Store and iTunes. Results are expected in early 2015 – and game operators should be watching closely.

The concerned game is free to download, but later requires payments to continue the game and to use different advantages. Payments get charged to credit cards associated to past purchases used in Google and Amazon accounts by default.

According to the ICA, the conducts could be misleading since consumers – who may be children and, indirectly, their parents – are not able to know in advance the full costs of the game and do not receive sufficient information about the settings needed to stop or limit the purchases within the App.

Moreover, it seems that children are exhorted to make purchases, or to persuade their parents to do so, and are induced to watch advertisements relating to different “free” apps in view of the possibility of obtaining free credits (to complete all levels and/or options).

ICA strictly scrutinizes commercial practices specifically aimed at children, as they are considered vulnerable consumers. Moreover, according to the Italian Consumer Code and EU directive n. 2005/29/CE, a direct exhortation to children to buy advertised products or persuade their parents or other adults to buy advertised products for them is considered unfair – in particular, “aggressive” – in all circumstances and, therefore, it is prohibited and subject to fines.

In these situations, the ICA may impose a fine between EUR 5,000 and EUR 5,000,000 for each breach of the Italian Consumer Code, taking into account, in particular, factors such as the gravity and the duration of the infringement. Usually, when the misleading advertising targets children the gravity is evaluated with severity.

It is not known whether the various companies under investigation have offered effective commitments in order to meet the ICA’s concerns. If this has occurred the proceedings may end with the acceptance of the commitments by the ICA, which would make them binding on the undertakings concerned, without a finding of infringement.

The investigation, which is likely to be concluded before the end of the year or early 2015, focuses on the same concerns raised by the Commission and Member States earlier this year with the app industry. The Commission requested large tech companies – in particular, Apple and Google – to provide solutions that protect users, particularly children, from errant and costly in-app purchases.

Commissioner Neven Mimica, responsible for Consumer Policy, said: “Consumers and in particular children need better protection against unexpected costs from in-app purchases. National enforcement authorities and the European Commission are discussing with industry how to address this issue which not only causes financial harm to consumers but can also put at stake the credibility of this very promising market. Coming up with concrete solutions as soon as possible will be a win-win for all.”

The ICA’s investigation is focused on four main issues highlighted by the EU Commission: the false advertising of “freemium” games as free, the targeting of children by in-app purchases, the need for explicit consent when processing orders for in-app items and the provision of an email for consumers to contact companies about inadvertent charges.

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Edoardo Tedeschi

Edoardo Tedeschi

Partner at Osborne Clarke
His particular emphasis is on technology-centric businesses (the video gaming industry, betting and online sales markets) and, in recent years, automotive and sports (digitally and IT driven).

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