App purchases: legal issues

The Commonwealth Consumer Affairs Advisory Council (CCAAC) has released a report on App purchases by Australian consumers on mobile and handheld devices.

The report discusses issues related to the purchase and use of apps which fall into five broad categories:

  • Inappropriate information — important information related to the use of apps, including with respect to billing and in-app purchases, may be absent or incorrect.
  • Ineffective disclosure — consumers may be provided with information related to the use of apps, including with respect to billing and in-app purchases; however, this information is not presented in a manner which is easily accessed or understood by the user.
  • Lack of familiarity with a new product — consumers lack familiarity with app markets, handheld devices and new business models (for example freemium apps) with consumers unaware of new risks that may exist.
  • Unsupervised use, and targeted marketing towards children — devices may be used in a manner not anticipated by the owner where in-app marketing is targeted to children (and where the owner’s billing information is saved). Other apps may present material that is not age-appropriate to the user, including the advertising of adult services such as online gambling.
  • Difficulties for consumers when seeking to make a complaint or seeking a refund —consumers may lack practical options for redress when experiencing a problem, including difficulties finding contact information and where app stores encourage users to contact the app developer for refunds.

The Australian Consumer Law (ACL) requires an app developer’s representations about the functionality of an app to be accurate and provides for remedies in the event that they are not. The consumer guarantee provisions are capable of applying to the purchase of apps. In addition, under the unfair contract terms provisions of the ACL, it is unlawful to include certain terms in standard form consumer contracts (for example, contracts for supply of goods or services for personal, domestic or household use or consumption).

The report concludes that there are some basic improvements that should be made by app stores to improve outcomes for consumers.

Regulation aplying to these issues include:
• the common law of contract, including in relation to the legal capacity of minors and children to enter contracts;
• the law relating to electronic transactions (Electronic Transactions Act 1999 (Cth));
• state and territory sale of goods laws (for example, the Goods Act 1958 (Vic));
• state and territory laws relating to minors who enter into contracts (for example, the Minors (Property and Contracts) Act 1970 (NSW));
• laws relating to pre-contractual conduct and disclosure obligations which may apply when accessing payment facilities on mobile devices (National Consumer Credit Protection Act 2009 (Cth));
• the law protecting personal information that is collected by companies (Privacy Act 1988 (Cth));
• Government agencies and industry ombudsmen with responsibilities for ensuring appropriate industry conduct including, the Australian Competition and Consumer Commission (ACCC), the ACMA and the Telecommunications Industry Ombudsman (TIO); and
• The Australian Guidelines for Electronic Commerce.

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