When Free-to-Play is No Longer Free-Options for Dealing with Unauthorized Charges Made by Children

I. Introduction

Mobile games are an increasingly popular consumer entertainment product. The mobile game industry is expected to generate over thirty billion dollars worldwide in 2015, surpassing console games’ expected twenty-six billion1. These predictions come at a time when the “mobile video game industry continues to ride a growing wave of free-to-play and casual game successes such as Supercell’s Clash of Clans and Rovio Entertainment’s Angry Birds Transformers.”2 Thus, free-to-play games are a large part of the greater mobile game industry’s success.

Free-to-play is a business model where a game can initially be played for free. In many games, players can eventually access and complete the entire game, but only after investing a prohibitively large amount of time in playing them. To counter this constraint, players are given the option of paying real-world money in order to advance in the game. These exchanges are called microtransactions or in-app purchases3. For example, in Clash of Clans players can pay money in exchange for gems, the in-game currency, but could also earn gems for playing the game well. The object of Clash of Clans is to raid other player’s bases for resources while fortifying one’s own. To purchase enough gems to fully upgrade a base’s protection against raids would cost approximately twelve thousand dollars4. On the other hand, to fully upgrade using only gems earned from playing the game would take around two thousand hours, or approximately eighty-eight days5.

Of course, these are extreme examples. Many gamers play and enjoy free-to-play games without emptying their pocketbooks or quitting their jobs. However, the potential to make large sums off of a single user, a so-called whale6, helps explain free-to-play games’ enormous success and revenues7. It also helps explain why companies like Sony are expanding their free-to-play offerings on consoles8, and why industry veterans like Nintendo are releasing mobile games for the first time9. Nintendo’s move is noteworthy because the developer has always been associated with family-friendly games targeted at children. However, even Nintendo’s 3DS (the successor to the hand-held Game Boy), with over seven million units sold10, cannot match the hundreds of millions of mobile phones in the hands of children today11.

Digitally storing payment information has made the free-to-play model even more viable. And as the model has evolved, so have the surreptitious ways the games allow users to spend money12. Games frustrate the user by making advancement difficult (though this by itself is not abnormal since any game requires skill to play). Free-to-play games offer a means to relieve that frustration by spending money13. However, the games obfuscate the real-world cost of advancement by adding an intermediary currency, like gems14. Rather than simply saying it will cost a certain dollar amount to upgrade a base, the game will allow players to purchase five hundred gems for, say, five dollars, leaving it up to the player to first determine amount of gems required to advance and then convert that to real-world dollars. Even this small additional step makes it more difficult for the brain to process the real-word cost of advancement15. This, coupled the frustration of wanting to advance, leads to spent dollars16. Being aware of these systems is the first step to counteracting them17.

II. Options for Dealing with Unauthorized Charges

A. Before the Purchase

  1. Set Parental Permission Settings and Enable Other Digital Controls

    Though not always enabled by default, nearly all electronic devices have a means of blocking charges with a special password. Many guides describing how to enable these safeguards for various devices are available online18 and parents should immediately implement them on all devices their children use, not just phones.

    Along with requiring a special password to make purchases, parents should consider other digital safeguards such as creating an iTunes allowance, reviewing the average cost of in-app purchases before downloading the game, or removing credit card information from iTunes altogether19.

  2. Choose Trustworthy Apps and Avoid Those with Outrageous Costs

    Many apps are totally free and many that are technically only free-to-play offer reasonable in-app purchases20. Parents should make use of these apps while avoiding those with outrageous in-app purchase prices21.

B. After the Purchase

  1. Use Refund Services Set Up by Companies Specifically to Deal with In-App Purchases by Minors

    In response to numerous lawsuits against Apple22, Google23, and Amazon24, some companies have set up systems to request refunds specifically for in-app purchases made by minors. Apple’s offer ended in April 201525 but Google’s will remain open through December 2015.26 These are likely the fastest and easiest way to get a refund.

  2. Reach Out to the Company or Developer

    By reaching out to the company or developer, either directly or through an attorney, parents may be able to work out an arrangement where they pay less, or not at all27. This is an especially worthwhile approach if it is the first time unauthorized charges have been made by a child28.

  3. Reach Out to the Bank or Credit Card Company

    Parents may be able to request a chargeback by contacting their bank or credit card company, but doing so can still subject them to debt collection from the company that billed them29. There are two categories of chargebacks: “claims and defenses” and “billing errors.”30 Credit card holder’s rights and requirements under each are different.31 Further, while the option to seek a chargeback under the billing errors category lasts for one year, the time to request one under the claims and defenses category is only sixty days.32 Thus, parents should be ready to request a chargeback, if they believe they are legally entitled to one, within three months of being issued the statement containing the disputed charge.33 The California Office of the Attorney General provides additional information34 and speaking with an attorney experienced in credit card transaction issues can help parents understand their rights when it comes to chargebacks.

  4. File a Complaint with Consumer Protection Bureaus

    Complaints to the Federal Trade Commission (“FTC”) prompted its lawsuits against Apple, Google, and Amazon, and resulted in Apple and Google’s agreements to put money back in the hands of consumers. While filing a complaint may not get immediate results, it could help others in the future.

  5. Pursue Private Legal Action

    Consumers have asserted a variety of legal claims directly against Apple35 and Google36. In a class action suit against Apple, plaintiffs claimed:

    1. contracts between Apple and minor children are voidable at the option of the parents;37
    2. violations of the California Consumers Legal Remedies Act38, which prevents “unfair methods of competition and unfair or deceptive acts or practices;”39
    3. violations of California’s Unfair Competition Law,40 which bars companies from engaging in unfair, unlawful, or fraudulent conduct;41
    4. breach of the implied covenant of good faith and fair dealing;42 and
    5. restitution/unjust enrichment/money had and received.43

Of these five claims, all but one survived Apple’s motion to dismiss. However, before going to trial, Apple and the plaintiffs reached a settlement agreement, wherein Apple agreed to pay over thirty million dollars to consumers whose children had made unauthorized in-app purchases.44 Thus, the viability of the claims above has not yet been tested in court. A similar class action was brought against Google,45 but was rejected in light of Google’s settlement with the FTC.46 This further calls into question the viability of the claims originally asserted against Apple. Nevertheless, parents considering filing a lawsuit should consult with an attorney to better understand the costs associated with a suit and the potential outcomes. At the very least, those that decide a lawsuit is not an option may benefit from having their attorney contact the company or developer to request a refund on their behalf.

III. Conclusion

The rise of free-to-play games continues to put parents at risk of unauthorized credit card charges. The best course of action is to prevent these charges from happening in the first place. But, in the unfortunate event a child does make unauthorized purchases, parents should not simply give up and pay the bill out of frustration. The options outlined above could help parents reduce or cancel these types of charges.




1 John Gaudiosi, Mobile Game Revenues Set to Overtake Console Games in 2015, Fortune (Jan. 15, 2015), http://fortune.com/2015/01/15/mobile-console-game-revenues-2015/ [hereinafter Gaudiosi, Mobile Game].

2Id.

3 This business model has a negative stigma. E.g., Jason Schreier, South Park Craps All Over Free-To-Play Games, Kotaku (Nov. 6, 2014), http://kotaku.com/south-park-craps-all-over-free-to-play-games-1655328455. This is especially so in multiplayer-focused games, where paying for access to better equipment gives players an advantage that (arguably) should be earned instead through practice and skill. Dan Crawley, H1Z1 Now Best-Selling Game on Steam, Criticized for ‘Pay-to-Win’ Mechanics, VentureBeat (Jan. 16, 2015), http://venturebeat.com/2015/01/16/h1z1-now-best-selling-game-on-steam-criticized-for-pay-to-win-mechanics/.

4 Steven Tweedie, Why 'Clash Of Clans' Is So Incredibly Popular, According to a Guy Who Plays 16 Hours a Day, Business Insider (Sept. 24, 2014), http://www.businessinsider.com/why-clash-of-clans-is-so-popular-2014-9.

5Id.

6 John Gaudiosi, The Wave of Free-to-Play Video Games Is Surging, and Sony's Along for the Ride, Fortune (Jan. 13, 2015), http://fortune.com/2015/01/13/sony-free-play-video-games/ [hereinafter Gaudiosi, Wave].

7 Tweedie, supra note 7. Clash of Clans brought in nearly one billion dollars in revenue in 2013. Id.

8 Gaudiosi, Wave, supra note 6.

9 Nintendo will be more accurately referring to their games as “free-to-start,” which arguably avoids the stigma associated with free-to-play games. Mathew Humphries, Nintendo Says Its Mobile Games Will Be Free-to-Start, not Free-to-Play, Geek (Mar. 24, 2015), http://www.geek.com/games/nintendos-mobile-games-will-be-free-to-start-not-free-to-play-1618748/.

10 Alex Seedhouse, Nintendo 3DS Hits 7.7 Million Install Base in North America, Nintendo Insider (Jan. 11, 2013), http://www.nintendo-insider.com/2013/01/11/nintendo-3ds-hits-7-7-million-install-base-in-north-america/.

11 Gaudiosi, Mobile Game, supra note 1. One hundred and twenty-one million smart phones were sold in the United States alone in 2013. Neil Hughes, Apple's iPhone Led 2013 US Consumer Smartphone Sales with 45% Share - NPD, Apple Insider (Feb. 20, 2014), http://appleinsider.com/articles/14/02/20/apples-iphone-led-2013-us-consumer-smartphone-sales-with-45-share---npd.

12 Riccardo D'Antoni, 40 Secrets to Making Money with In-App Purchases, Raywenderlich (June 27, 2013), http://www.raywenderlich.com/39647/40-secrets-to-making-money-with-in-app-purchases; Ramin Shokrizade, The Top F2P Monetization Tricks, Gamasutra (June 26, 2013), http://www.gamasutra.com/blogs/RaminShokrizade/20130626/194933/The_Top_F2P_Monetization_Tricks.php.

13 Shokrizade, supra note 12; D'Antoni, supra note 12.

14 Shokrizade, supra note 12.

15 Id.

16 Id.

17 Both Shokrizade and D'Antoni give excellent examples of how the free-to-play model is implemented in actual games on the market today. Shokrizade, supra note 12; D'Antoni, supra note 12.

18 E.g., Andrea Smith, How to Set Parental Controls on In-App Purchases, Mashable (Mar. 29, 2013), http://mashable.com/2013/03/29/guide-to-setting-parental-controls/.

19 Lauren Hockenson, 5 Tools to Prevent Your Kids From Blowing Your Money on iTunes’ In-App Purchases, Gigaom (July 28, 2013), https://gigaom.com/2013/07/28/5-tools-to-prevent-your-kids-from-itunes-in-app-purchases/.

20 Stuart Dredge, 50 Best Apps for Kids from 2013 That Parents Can Trust, Gigaom (July 28, 2013), http://www.theguardian.com/technology/appsblog/2013/jun/19/50-best-apps-kids-iphone-android-ipad.

21 Stuart Dredge, 10 Mobile Games for Kids with £69.99 In-App Purchase Options, The Guardian (June 27, 2013), http://www.theguardian.com/technology/appsblog/gallery/2013/jun/07/kids-apps-in-app-purchases.

22 Press Release, Federal Trade Commission, Apple Inc. Will Provide Full Consumer Refunds of At Least $32.5 Million to Settle FTC Complaint It Charged for Kids’ In-App Purchases Without Parental Consent (Jan. 15, 2014), available at https://www.ftc.gov/news-events/press-releases/2014/01/apple-inc-will-provide-full-consumer-refunds-least-325-million. Along with the Federal Trade Commission (“FTC”) settlement, Apple also agreed to pay consumers under a class action settlement in 2013. Sarah Mirando, Apple In-App Purchase Class Action Settlement Gets Approval, Top Class Actions (May 7, 2013), http://topclassactions.com/lawsuit-settlements/lawsuit-news/4068-apple-in-app-purchase-class-action-settlement-gets-approval/. The claims consumers asserted are discussed in Part II.B.6.

23 Press Release, Federal Trade Commission, Google to Refund Consumers at Least $19 Million to Settle FTC Complaint It Unlawfully Billed Parents for Children’s Unauthorized In-App Charges (Sept. 4, 2014), available at https://www.ftc.gov/news-events/press-releases/2014/09/google-refund-consumers-least-19-million-settle-ftc-complaint-it.

24 Press Release, Federal Trade Commission, FTC Alleges Amazon Unlawfully Billed Parents for Millions of Dollars in Children’s Unauthorized In-App Charges (July 10, 2014), available at https://www.ftc.gov/news-events/press-releases/2014/07/ftc-alleges-amazon-unlawfully-billed-parents-millions-dollars. Of the three companies the FTC initiated actions against, only Amazon has refused to settle out of court. Wendy Davis, Amazon Battles FTC Over Kids' In-App Purchases, MediaPost (Oct. 3, 2014), http://www.mediapost.com/publications/article/235472/amazon-battles-ftc-over-kids-in-app-purchases.html.

25 Owen S. Good, Apple Tells Customers How to Get Refunds for Unauthorized In-App Purchases, Polygon (Apr. 7, 2014), http://www.polygon.com/2014/4/7/5590252/apple-tells-customers-how-to-get-refunds-for-unauthorized-in-app.

26 Fox Van Allen, How to Seek Refunds for Unauthorized Android In-App Purchases, Techlicious (Dec. 10, 2014), http://www.techlicious.com/blog/google-play-android-unauthorized-in-app-purchases-refund-procedure/. Refunds can be requested at https://play.google.com/store/ftc.

27 Anthony Giorgianni, Are You Responsible for Purchases Your Kids Make Without Your Permission?, Consumer Reports (July 16, 2014), http://www.consumerreports.org/cro/news/2014/07/are-you-responsible-for-purchases-your-kids-make-without-your-permission/index.htm.

28Id.

29Id.

30 State of California Department of Justice Office of the Attorney General, Credit Card Chargeback Rights, St. Cal. Department Just. Off. Att’y Gen., https://oag.ca.gov/consumers/general/credit_card_chargeback_rights (last visited Apr. 30, 2015).

31Id.

32Id.

33Id.

34Id.

35 In re Apple In–App Purchase Litigation, 855 F.Supp.2d 1030 (N.D. Cal. 2012).

36 Imber-Gluck v. Google, Inc., No. 5:14–CV–01070–RMW, 2014 WL 3600506, (N.D. Cal 2014).

37 In re Apple In–App Purchase Litigation, 855 F.Supp.2d at 1035.

38 Consumer Legal Remedies Act, Cal. Civ. Code §§ 1750–1756 (West 2015), available at http://www.leginfo.ca.gov/cgi-bin/displaycode?section=civ&group=01001-02000&file=1750-1756.

39 In re Apple In–App Purchase Litigation, 855 F.Supp.2d at 1038 (internal quotation marks omitted).

40 Cal. Bus. & Prof. Code §§ 17200–17210 (West 2015), available at http://www.leginfo.ca.gov/cgi-bin/displaycode?section=bpc&group=17001-18000&file=17200-17210.

41 In re Apple In–App Purchase Litigation, 855 F.Supp.2d at 1041.

42 In re Apple In–App Purchase Litigation, 855 F.Supp.2d at 1041.

432Id.

44 In re Apple In–App Purchase Litigation, 5:11–cv–01758 EJD, 2013 WL 1856713, (N.D. Cal 2013); Home Page, In re Apple In-App Purchase Litig., https://www.itunesinapppurchasesettlement.com/CAClaimForms/AIL/Home.aspx (last visited Apr. 30, 2015). The window for members of the class to make claims for their share of the funds expired in 2014. Id.

45 Imber-Gluck v. Google, Inc., No. 5:14–CV–01070–RMW, 2014 WL 3600506, (N.D. Cal 2014).

46 Imber-Gluck v. Google, Inc., No. 5:14–CV–01070–RMW, 2015 WL 1522076, (N.D. Cal 2015).