Italy’s Antitrust Group Doesn’t Trust Google And Its Freemium Model

May 18, 2014 - Written By Phil Bourget

Freemium apps.  They cost no money to download and play as they are, but if you want an extra life, a few more potions or gold for the next level, or want to unlock the next set of race tracks right then, then it’s time to pay up.  Seems simple enough, right?  Yet still the major players in the freemium app business, Apple, Google, and Amazon, have received so much bad press for their freemium app popularity, but more specifically, how the customer is either left uninformed or their funds left unsecured.

The freemium app model was revised last year, when Apple received international complaints and lawsuits from parents of children that, unbeknownst to the parent, spent extortionate amounts of their parent’s/parents’ money on in-app purchases, sometimes shortened to IAP.  These prompted Apple and Google to add security and ‘purchase timeout’ (a set amount of time before the purchaser had to enter the password for the account to actually authorize another payment), but still trouble persists for this relatively recent boom in and of freemium apps and their shortcomings.

This week, the Italian Antitrust and Competition Authority (ACA) follows in the European Union’s earlier efforts to reform the use and implementation of the freemium app model.  For the sake of these dealings, the model refers to ‘free to download, but then later require payments that often get charged to credit cards by default’, with this definition coming to us form The Wall Street Journal this past Friday.

The reason for the push in freemium reform is that it has, and likely according to the EU, will continue to hurt the app economy on Europe, whose total revenue is expected to reach €63 billion in revenue in 2018, which is three times what it made in 2013.  This profitable market currently employs over a million people.   The ACA reported Friday that it is currently investigating the practices around and of freemium apps in all three major app stores, including Apple, Google, and Amazon, as well as the French game developer Gameloft.  The driving claim, and the one that the ACA hopes to uncover the truth of, is the question of ‘is the freemium model misleading customers and convincing them that the app is ultimately free?’, which is entirely the opposite in reality.  The issue lies in that the companies may be found to be convincing customers that the app is wholly free, and that they are being charged without he customer’s/customers’ knowledge or consent.

This investigation, it proves that the companies were in fact misleading customers, could cost them.  It is estimated that if any of the companies is found to be at fault, they will be fined with the maximum amount that the ACA can demand, at €5 million.  Though this is infinitesimally smaller than each company’s annual revenue, it is still a fee that will tarnish them slightly, as well as their reception and reputation both with the European government(s) and the European consumers.  The investigation is expected to come to an end by the end of this calendar year, according to the ACA.