Italy’s Antitrust and Competition Authority is launching an investigation into whether internet companies Apple, Google and Amazon are misleading people with ‘freemium’ app models, according to The Wall Street Journal. Freemium apps are usually free to download, but require purchases within the app before allowing access to proprietary features, functionality or virtual goods.
The move by Italy’s Antitrust and Competition Authority comes after the European Union earlier this year called on companies to reform their use of the “freemium” model in which apps are free to download, but then later require payments that often get charged to credit cards by default. The EU says consumer confusion with the freemium model threatens the long-term health of the continent’s booming “app economy” that employs more than one million people and is forecast to produce €63 billion in total revenue in 2018, more than triple last year’s level.
According to the regulator, consumers could be unaware of an app’s ‘true cost’ at the time of download and might be misled into thinking that the usage of the app would be entirely free. Meanwhile, internet companies do not provide sufficient information on how to ‘exclude or limit the possibility’ of an in-app purchase.
Freemium apps have grown in popularity in recent years as developers seek new ways to boost their revenue stream. Tech site Mashable noted in a December 2013 report that in seven of the top ten categories on the App Store, majority of revenue came from in-app purchases.
However, the app model has also faced a considerable amount of criticism from players and critics, especially parents whose children unknowingly rack up hundreds of dollars in credit charges via in-app purchases for virtual currencies or access to new game levels, such as in the case of Smurfs’ Village last year.
According to the Italian regulator, the investigation into all three companies are likely to be concluded by the end of the year.