Apple and Others Investigated in Italian Freemium App Flap

App Store 2008

Apple (NASDAQ:AAPL), Amazon (NASDAQ:AMZN), and Google (NASDAQ:GOOG) (NASDAQ:GOOGL) have found themselves on the wrong side of the law in Italy over their “freemium” model app sales, reports The Wall Street Journal. Freemium apps can be downloaded free of charge, but include the option to buy additional features for a fee. Italy’s Antitrust and Competition Authority is investigating whether or not Apple and the other tech companies misled consumers who racked up unintended credit card charges from purchases made through the apps. Apple’s iTunes App Store, Amazon’s Appstore, and Google’s Google Play are three of the largest mobile app stores and all of them offer many freemium apps.

“Consumers could be led to think, contrary to reality, that a game is completely free and therefore they don’t know ahead of time the game’s true cost,” said an Italian regulator in a statement obtained by The Wall Street Journal. “It appears also that there is a lack of information regarding how to exclude or limit the possibility of making a purchase inside the app.”

This is not the first time that the tech companies have faced scrutiny over their freemium app sales in Europe. In February, the European Commission asked mobile app vendors to commit to certain consumer protection standards, especially in regards to automatic debits through default settings in freemium apps. Vice-President Viviane Reding — the EU’s Justice Commissioner — noted that the current implementation of the freemium app model not only harms consumers, but the app industry as a whole.

“Europe’s app industry has enormous potential, both to generate jobs and growth, and to improve our daily lives through innovative technology,” stated Reding in a European Commission press release. “For the sector to deliver on its potential consumers must have confidence in new products. Misleading consumers is clearly the wrong business model and also goes against the spirit of EU rules on consumer protection.”

According to The Wall Street Journal, the EU has reached out to the Italian authorities in order to coordinate a response to the freemium app problem. Although the Italian authorities’ investigation may add to the bad reputation that freemium apps have acquired in Europe, the results are unlikely to cause long-term harm to the accused tech companies’ bottom lines. As noted by The Wall Street Journal, the maximum fine that Italy’s Antitrust and Competition Authority can impose is 5 million euros, or about $6.8 million. However, Apple previously changed its AppleCare marketing policy in Italy in response to a relatively small fine from Italian regulators.

Apple ran into trouble over a similar issue in the U.S. when consumers were billed for millions of dollars of charges that were incurred by children who made in-app purchases while using various kids’ mobile apps. Under a settlement reached with the Federal Trade Commission earlier this year, Apple modified its billing practices and provided refunds to consumers.

More from Wall St. Cheat Sheet:

Follow Nathanael on Twitter (@ArnoldEtan_WSCS)