Parents win round one in court case against Apple over freemium games

By Joel Brodie | Apr 13, 2012 |

One of the most under-reported stories relates to the amount of money being spent by kids in iPhone games, unbeknownst to their parents until they see a bill for hundreds of dollars.

This story is about to blow up, thanks to a judge’s decision in a San Jose court not to dismiss a class action lawsuit filed by disgruntled parents against Apple about what they term as “bait apps” but what we call freemium games, or games that are free to play but require purchases of virtual goods to progress.

The issue is how passwords and purchases work in the iTunes store. To download an app and purchase an item, you must enter your password. But, there is by default a 15-minute period of time thereafter where you don’t have to enter your password again. And if you give your kid your iPhone to play Smurfs Village and they see they can “get” some smurfberries by clicking “buy" (previously, at the low cost of $99, this is how the controversy started), you can imagine the amount of monetary damage that can be done (answer is, a lot).

The judge dismissed Apple’s request to dismiss the case. Apple, with its litany of lawyers, will probably be able to it dismissed in a higher court.

But the problem for Apple and its freemium game partners is that this is actually not a frivolous class-action lawsuit. This is a serious, unaddressed problem.

The New York Times notes that according to Flurry, 65% of App Store revenues comes from freemium games, and poses, “how much money comes from children sneakily using their parents’ credit card?”

The answer is, no one knows, but my guess, is much more than you could ever expect. Not a day goes by when some parent does not write into Gamezebo asking us to help them figure out how to get a $500+ game purchase refunded back due to their children purchasing virtual goods. The problem is that Apple refers parents to the game companies for a refund and some game companies refer the matter back to Apple. In some cases, and I am not making this up, someone in customer service refers the parent to Gamezebo (don’t ask, I don’t get it either).

The recent hubbub is around the App Store is privacy and UDID’s. I truly believe that Apple is working right now to solve this problem as we speak.

The next big scandal will be kids using their parents credit cards and passwords to run up bills for virtual goods in the thousands of dollars.

Apple should focus its attention less on legally challenging the lawsuit and more on fixing the problem:

  • Removing the 15 minute password window or making it more clear to parents how to use parental controls and the restrictions feature in "settings" to change this default to automatically requesting a password every time at purchase
  • Putting a limit on the amount of micro-transactions that can be purchased at a time (similar to how credit card companies track fraudulent activity)
  • Publishing a credit refund policy more prominent than hidden in the terms of service
  • If the onus is on its game partners, enforce the refund rules with game developers and if a game developer does not issue a refund, punish them.

As long as kids want to play with their parents’ iPhones (and if you have ever seen a kid with an iPhone, its more than their love for candy or ice cream), this problem is not going to go away.

Read more: iPhone, lawsuits, UDID, Apple

Get Gamezebo daily updates in your inbox