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Sweden: Legislation to Limit Children’s Smartphone Spending Being Considered

(Sept. 14, 2012) On September 12, 2012, Birgitta Ohlsson, the Swedish minister responsible for consumer affairs, announced that the government might introduce legislation “to prevent children from emptying their parents’ bank accounts in just a few clicks when playing with their smartphones,” potentially subjecting the parents to financial ruin. (Sweden Mulls Law on Kids’ Phone Spending, THE LOCAL (Sept. 12, 2012).) Ohlsson’s comments were based on the report “App to Date,” submitted to the ministry by an independent committee charged with making recommendations on improving protection for consumers in the mobile phone market. (<?Id.)

The report’s main author, a former justice of Sweden’s Supreme Court, proposed “that in disputes where parents contest exorbitant fees which they claim were charged by their children, the law should assume that the parents are dealing in good faith.” (Id.) The report also called for strengthening of controls to verify that those who make a purchase by cell phone or tablet computer are the actual owners of the debited bank account. (Id.)

In making its recommendation, the report cited a case highlighted by the local press in April 2011, when two young brothers, six and seven years old, spent SEK50,000 (about US$7,600) in connection with the Smurf Village game, which their mother had purchased for them for seven kronor from the Apple iTunes store before a family road trip. Once the children were playing the game, however, unbeknownst to the mother, it became possible for them to make purchases without the use of a password. It was only after “a flood of payment messages started to flow in” from the App store that the parents realized they had a problem. (Id.; Kids’ iPad Gaming Binge Costs Parents Thousands, THE LOCAL (Apr. 7, 2011).) In the end, after negotiations, the parents were not required to pay for the purchases. (Sweden Mulls Law on Kids’ Phone Spending.)

Related Developments

The Smurfs Village incident was reportedly “the first high-profile controversy around children and in-app purchases (IAP).” Some app developers continue to offer the tempting virtual additions to online games for children, which can be purchased simply be entering an iTunes password and the collection of which has been likened in the case of some games to the hoarding of baseball cards by previous generations. (Stuart Dredge, Is Regulation Required to Stop IAP Abuse in Apps for Kids?: Children’s Media Conference Panel Debates Whether Governments or Apple Should Step In, THE GUARDIAN APPS BLOG (July 9, 2012, 10:04); Anton Troianovski, Spencer E. Ante, & Jessica E. Vascellaro, Mom, Please Feed My Apps!, THE WALL STREET JOURNAL (updated June 11, 2012).)

Questions are being posed, however, as to how to handle the “shadier practices” involving in-apps. Given that “[s]elf-regulation by app publishers doesn’t seem to be working,” one reporter asked, “is it time for stricter rules and punishment from Apple and other app store owners? Or even government regulation?” (Dredge, supra.) A games industry consultant, speaking in a panel session on apps at the Children’s Media Conference in England held from July 4-6, 2012, expressed the view that there probably will be regulation, but also indicated that individual companies, rather than the whole industry, might face censure. (Id.) As the Wall Street Journal noted, “[t]he sale of virtual goods has gone mainstream so quickly that regulators are having a hard time keeping up.” (Troianovski et al., supra.)

In the United States, in the meantime, it was reported in April 2012 that a California judge had denied a request by Apple to have a lawsuit that was brought against it by a group of parents, whose children had spent large amounts of money on IAPs, dismissed. The suit was filed originally in April 2011. (Phillip Swanson, In-App Purchases Class Action Law Suit Allowed to Proceed, MODMYI.COM (Apr. 21, 2012); Troianovski et al., supra.) The U.S. Federal Trade Commission relies on the 14-year-old Children’s Online Privacy Protection Act and other laws to regulate children’s apps, but the matter of sale of virtual goods is not directly addressed, and so the FTC is reportedly considering new rules to govern such online purchases by children. (Troianovski et al., supra; MOBILE APPS FOR KIDS: CURRENT PRIVACY DISCLOSURES ARE DISAPPOINTING, FTC website (Feb. 2012).)