Apple changes policy for in-app purchases

Washington Post Staff Writer
Thursday, March 10, 2011; 10:56 PM

Apple took a step toward child-protecting the iPhone and iPad, saying Thursday that it has tightened security measures for purchases made within applications.

The company said its upgraded operating system released Wednesday requires users to submit an iTunes password to make a purchase on a newly downloaded app. Previously, the company allowed charges without a password for 15 minutes after putting software on a device.

In some cases, children racked up hundreds of dollars in charges in that period.

The move comes during a time of increased scrutiny over in-app purchases on mobile devices, a business model expected to help media and retail companies create new lines of revenue on tablets and smartphones.

The practice, however, has also caught many parents by surprise.

Some of highest-grossing apps on Apple devices are children's games such as Smurfs Village and Tap Zoo, where users can spend $99 for "Smurfberries" and "snowflakes" to advance levels.

The Federal Trade Commission said last month that it would review Apple's policy after lawmakers raised concerns that children appeared to be targeted by companies with vague and misleading marketing. The games in question are typically free to download.

Apple declined to comment on why it changed its policy. And it points out that its devices allow users to block all in-app purchases. App makers say they warn users upon download that charges are real and will be billed directly to iTunes accounts. Apple gets 30 percent of any in-app purchases.

"We are proud to have industry-leading parental controls with iOS," said Trudy Muller, a spokeswoman for Apple. "With iOS 4.3, in addition to a password being required to purchase an app on the App Store, a reentry of your password is now required when making an in-app purchase."

The change drew praise from consumer advocates.

The Washington state attorney general's office, which had been talking with Apple's lawyers for weeks after receiving complaints from consumers, said the change is a "victory for consumers" and an "elegant solution" to protect families who had assumed all purchases were password-protected.

Public interest groups, however, still question why $9 and $99 purchases are in a child-focused game. They say children may not understand that they spending real money, as video games often use pretend currency.

And some experts on consumer protection law say the move may not completely allay federal regulatory interest. The FTC is growing more concerned over security and privacy on mobile devices, according to Linda Goldstein, chair of the advertising and marketing division at the Manatt, Phelps & Phillips law firm. She said in-app purchases are an example of a practice that cuts across many consumer protection issues, such as marketing to children and recurring charges to a "non-traditional billing device."

An FTC spokesman said only that the move is "a step in the right direction."

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