Letter to The Honorable Jon Leibowitz, Chairman of Federal Trade Commission

Letter

After 8-year-old racks up $1400 bill on the iPhone game "Smurfs' Village,' Klobuchar says more oversight is needed; Klobuchar urges FTC to examine free-to- download applications that may result in expensive, inadvertent charges

U.S. Senator Amy Klobuchar sent a letter to Federal Trade Commission Chairman Jon Leibowitz today urging oversight of billing practices known as "in-app sales," where companies offer free-to-download applications for smartphones and then charge users for other products and services once the application is launched -- often without a clear warning of how much customers are being charged. Recent media reports indicate many of these applications are games marketed to children, who may be unaware of these additional charges, including an instance reported by the Washington Post where an 8-year-old racked up a $1400 bill playing the iPhone game "Smurfs' Village."

"Consumers have the right to know the true cost of the products and services they are downloading on their smartphones, especially when it comes to applications and games that are geared towards children," Klobuchar wrote in the letter. "As with any new billing practice, there is always the potential for consumer confusion and bill shock, and "in-app sales' are no exception."

Klobuchar has worked to protect consumers from harmful billing practices such as "cramming," which occurs when a third party adds unauthorized, misleading, or deceptive charges to consumers' phone bills. Klobuchar is a member of the Senate Commerce Subcommittee on Communications, Technology, and the Internet.

The full text of the letter is below:

February 8, 2011

The Honorable Jon Leibowitz

Chairman, Federal Trade Commission

600 Pennsylvania Avenue, NW

Washington, DC 20580

Dear Chairman Leibowitz:

I write to you today about so-called "in-app sales," a practice where companies offer free-to-download applications for smartphones and then charge users for certain products and services once the application is launched. Recent media reports indicate that these in-app sales are misleading to consumers who may be unaware that they are racking up hundreds of dollars in inadvertent charges.

The most troubling aspect about this practice is the fact that these applications--many of which are games--are typically marketed towards children. A child who downloads an application on his or her smartphone may not understand that, although the application itself is free, each individual service within that application has its own price tag. It isn't until the bill arrives that parents realize these games come with hidden costs. In fact, according to the Washington Post, one 8-year old recently racked up a $1400 bill playing the iPhone game "Smurfs' Village."

As you may know, I have long advocated for greater transparency in wireless billing practices. Consumers have the right to know the true cost of the products and services they are downloading on their smartphones, especially when it comes to applications and games that are geared towards children. As with any new billing practice, there is always the potential for consumer confusion and bill shock, and "in-app sales" are no exception.

While smartphone applications have unlocked a world of new markets and innovative revenue streams for newspapers and other businesses, we need common sense safeguards to ensure that in-app sales are not misleading and gouging consumers. I urge the FTC to examine this practice and to consider rules that would add transparency and clarity to the in-app market.

Sincerely,

Amy Klobuchar

United States Senator

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