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Apple Hit With Class Action Lawsuit Over Minors' Purchase Of In-App Goods

The Huffington Post   First Posted: 04/16/11 10:40 AM ET Updated: 06/15/11 06:12 AM ET

Apple Lawsuit

Who knew Fish Bucks, Pouches of Stars and Smurfberries could cause such trouble? Apple is facing a class-action lawsuit from parents alleging the company lets minors purchase virtual goods in app games without parental approval.

Though Apple recently changed its policy to require passwords each time an in-app transaction is made, the lawsuit contends that Apple continues to profit unfairly from the sale of in-app goods. These games, downloaded for free, are known as "freemium" games. They often offer the opportunity to purchase virtual currency, that, despite the silly names, cost real money.

"The targeting of children by Apple and inducing them to purchase without the knowledge or authorization of their parents, millions of dollars of Game Currency is unlawful exploitation in the extreme," the complaint says.

Previously, children had been spending chunks of their unsuspecting parents' money on things like Smurfberries, in the game "Smurf's Village." For the first fifteen minutes after download, no password is required to buy items. Even after the update, that fifteen-minute window still exists after the password is entered upon opening an app.

Garen Meguerian, who filed the suit, found that his 9-year-old daughter had purchased around $200 in virtual goods from free games including "Zombie Cafe" and "City Story," without his knowledge.

"Such games are designed to induce purchases," the complaint says. "These games are highly addictive, designed deliberately so, and tend to compel children playing them to purchase large quantities of Game Currency, amounting to as much as $100 per purchase or more."

At issue is Apple's complicity in the sale of these goods. The suit alleges that Apple is deliberately exploiting minors to make millions of dollars.

"Apple supervises and controls the function and operation of the Apps it sells," the complaint states, going on to note that "the sale of the App and/or any Game Currency is a transaction directly between Apple and the consumer." Because Apple is the one charging the credit card, Apple, and not the third-party apps providing the games, are the ones to blame, according to the suit.

The complaint illustrates the issue by describing the set-up of the game "Smurf's Village," where users enter a virtual world with the object of building a village. The game, while free to download, offers bundles of Smurfberries, which are important in achieving the aim of the game. A bundle of 1,000 Smurfberries is 59 dollars.

"Apple offers many games that use the same bait-and-switch business scheme as Smurf's Village," the complaint alleges. "Apple entices the child with a free download of a gaming platform that then offers the sale of irresistible Game Currency in order to enjoy the game as it was designed."

The Federal Trade Commission had started to look into the issue of minors purchasing in-app goods before Apple instated the password-check change. "Smurf's VIllage" has also added a warning that in-app goods cost real money to its iTunes page.

The suit comes at a time where the profitability of such virtual games seems poised to explode. A survey by Urban Airship predicted that in-app purchasing would rise from 8 percent in 2010 to 31 percent in 2011. Further, research firm Distimo discovered that 34 percent of revenue generated by the top 100 apps comes from "freemium" apps, despite the fact that less than 2 percent of all apps follow such a model.

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