Apple Password Controls On iPhone in-App Purchases

With the introduction of its new iOS 4.3 operating system update, Apple has upgraded password protection around purchases made within iPhone and iPad applications, an attempt to prevent consumers (particularly children) from unwittingly racking up substantial iTunes charges. IOS 4.3 introduces a new feature requiring password entry when virtual goods, game add-ons and other features are purchased within an application downloaded to an iOS-based device: "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," Apple spokesperson Trudy Muller told The Washington Post.

The move follows weeks after the Federal Trade Commission stated it would review potentially deceptive practices connected to in-app purchases within children's games optimized for iOS. Rep. Edward J. Markey (D-Mass.) and Sens. Amy Klobuchar (D-Minn.) and Mark Pryor (D-Ark.) first alerted FTC chairman Jon Leibowitz to the issue, writing letters urging the consumer watchdog to investigate the in-app transaction model. "We fully share your concern that consumers, particularly children, are unlikely to understand the ramifications of these types of purchases," Leibowitz replied in a letter to Markey. "Let me assure you we will look closely at the current industry practice with respect to the marketing and delivery of these types of applications."

Markey wrote that the in-app purchase model may be deceptive, explaining that when parents download titles geared for their children, they do not anticipate the application will include virtual items available for sale. Last month, The Washington Post reported multiple parent complaints tied to in-app transactions across the iOS platform--one child playing the Smurfs Village game spent a reported $1,400 acquiring batches of Smurfberries priced at $99 each.

Consumer protection experts question whether Apple's new policies go far enough to satisfy lawmaker concerns, however. Linda Goldstein, Advertising and Marketing Chair at law firm Manatt, Phelps & Phillips, said that in-app purchases encompass multiple consumer protection issues, including marketing to children and recurring charges to a "non-traditional billing device." According to Goldstein, mobile devices have "essentially become the equivalent of credit cards in the hands of children. When that happens and you have on top of that programs that inherently involve recurring charges, it's a recipe for high FTC scrutiny." 

App store analytics firm Distimo reports that between June 2010 and December 2010, revenues generated by in-app purchases in free applications more than doubled across both the iPhone and iPad. In-app transactions across free and premium apps now account for 49 percent of iPhone developer revenues and 29 percent of iPad developer income. Source:fiercemobilecontent