Google, Amazon, Apple and French mobile games developer Gameloft averted the threat of fines over the way the companies communicate the costs of payments in apps that are free to download, after reaching a voluntary agreement with the Autorità Garante della Concorrenza e del Mercato (AGCM), Italy's competition authority.
In a decision that affects the four companies' businesses throughout the European Union (EU), Gameloft, Google, Amazon and Apple agreed to drop the word 'free' from apps that cost nothing to download, but later require the user to make in-app purchases. Although apparently only a small effort on behalf of the companies, the move averts the possibility of the AGCM issuing fines of up to €5 million ($5.6 million) apiece, the Wall Street Journal reported.
The AGCM opened an investigation into the so-called 'freemium' apps model in May 2014 following a complaint by Italian consumer association Altroconsumo. Freemium apps are typically free to download, but then require users to make purchases to access additional features or content. The investigation was conducted in conjunction with the European Commission, after the EU had previously called for the freemium model to be changed, the Journal noted.
In a statement, the AGCM explained that getting the companies to agree to make changes voluntarily will deliver better value to consumers than issuing fines.
Referring to the voluntary agreement, the AGCM noted that "consumers can now rely on guarantees higher than those that could have been achieved by punishing professionals involved in commercial practice."
In addition to removing the word 'free' from app descriptions, the four companies "have also proposed measures to allow consumers a more effective and conscious control over the means of payment associated with the device, so as to prevent unwanted purchases," the statement continued.
The Journal said that freemium apps account for at least 50 per cent of the total online games market in Europe, and cited EU predictions that the value of the total app market in the region will triple between 2013 and 2018, when it will generate €263 million in revenue. The EU is concerned that long-term value may not be achieved if consumers are misled regarding which apps are 'free' and which operate under the freemium model, the Journal added.
Altroconsumo head Marco Pierani hailed the decision, but told the Journal it is important to ensure that Google, Amazon, Apple, Gameloft and others stand by their agreement, which gives the companies 60 days to comply.
For more:
- see this Wall Street Journal article (sub. req.)
- view the AGCM statement (in Italian)
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