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Tuesday, February 22, 2011, 07:20 pm PT (10:20 pm ET)

FTC to investigate iTunes in-app purchases after receiving complaints

Parental complaints over iTunes App Store in-app purchases in children's games such as "Smurfs' Village" have prompted the Federal Trade Commission to look into the matter, according to a new report.

Earlier this month, The Washington Post wrote about growing parental and public interest group dissatisfaction with Apple's in-app purchase policies. After learning of the issue, U.S. legislator Rep. Ed Markey sent a concerned letter to the FTC.

FTC Chairman Jon Leibowitz responded to Markey's correspondence on Tuesday. "We fully share your concern that consumers, particularly children, are unlikely to understand the ramifications of these types of purchases," Leibowitz wrote. "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 issued a statement commenting on the FTC's response. “I sent the Federal Trade Commission a letter calling on the agency to investigate the issue of 'in-app' purchases and provide additional information about the promotion and delivery of these applications to consumers, especially with respect to children," Markey wrote. "What may appear in these games to be virtual coins and prizes to children result in very real costs to parents. I am pleased that the FTC has responded, and as the use of mobile apps continues to increase, I will continue to actively monitor developments in this important area."

After consumers began complaining of "accidental" in-app purchases in Capcom's "Smurfs' Village" app, Apple reportedly had harsh words for the developer earlier this month.

"Apple has told Capcom in no uncertain terms that its freemium children's game has been causing problems with an increasingly significant number of parents who have complained that their children have been racking up large amounts of in-app purchases without their knowledge," said one report.

Also at issue is an iOS feature that can allow purchases for up to 15-minutes after a password is entered. Some parents have reported having their password guessed by their children. Though in-app purchases can be disabled in the Restrictions settings pane in OS, public interest groups are lobbying for the setting to be disabled by default.

Responding to complaints of accidental purchases, Capcom recently added a disclaimer on iTunes and an in-app pop-up warning notifying users that items purchased in the game can cost real money.

In December last year, users complained of unauthorized in-app purchases from a Chinese language game. Several reviewers of the game alleged that their accounts had been "hacked" and purchased had been made without their approval.

Apple first introduced in-app purchases with the release of iOS 3.0 in 2009. The feature was initially limited to paid applications, but was made available to free apps later that year.

The iPhone maker receives 30 percent of the revenue generated from in-app purchases.

Recent Congressional involvement resemblesa situation, also involving Markey, that took place over Apple's iOS privacy policy last year. The LA Times erroneously reported in June that Apple had revised its privacy policy to begin tracking users' locations. After reading the report, Markey sent a letter to Apple Chief Executive Steve Jobs asking for clarification on the issue.

Apple general counsel Bruce Sewell responded in July, detailing Apple's privacy policy regarding location-based services.

"Apple's responses provided additional information about how it uses location data and the ability of consumers to exercise control over a variety of features on Apple's products, and I appreciate the company's response," Markey said in a statement at the time.