Apple (AAPL) settles iTunes lawsuit: offers $5 gift cards, kids racked up big bills in 'free' games
Doug Gross, CNN
12:57 PM, Feb 26, 2013
(CNN) -- Apple has settled a lawsuit filed by parents who say their kids downloaded free games from the mobile App Store and then proceeded to rack up hefty bills buying in-game extras.
Under the proposed settlement of a 2011 class-action lawsuit, Apple will offer a $5 iTunes gift card to any U.S. parent who claims that their child paid for extras without their knowledge. The company will offer larger credits, or cash refunds, for people who can show that their bills were larger than $5.
On Friday, the deal will go before a federal judge, who is expected to approve it.
The proposed settlement, first reported by legal-news site Law360 and tech blog GigaOM, does not state how much Apple will pay overall or how many users are affected. Apple will create a website for people interested in cashing in on the settlement and send an e-mail notification to roughly 23 million customers.
People who want more than $5 must show that a larger amount was racked up by their kids in any 45-day period. Those who can show more than $30 in purchases may choose a cash refund instead of an Apple credit. Purchases made until the date of the settlement would be eligible for refunds.
An Apple spokesman said the company would have no comment on the proposed settlement.
In the past few years, this "freemium" business model has become increasingly popular in mobile and social gaming. Zynga games like "FarmVille" led the way for games that are free to download and play but then require players to pay small fees for in-game upgrades or premium content.
Those fees can add up quickly. The lawsuit came after media reports of several cases in which kids' in-game purchases led to parental sticker shock.
Kevin Ofel, an editor at GigaOM, wrote that he got a 2010 iTunes bill for $375 after his kids spent money on the game "TapFish," a virtual aquarium that can be loosely described as "FarmVille" under water.
The lure of digital fish is apparently a strong one. A Florida father reported that his 7-year-old amassed a $613 bill playing the same game.
On its iTunes page, the latest version of the game, "TapFish 2," lists "top in-app purchases" ranging from 99 cents up to $19.99. The game is listed as appropriate for children 4 and older.
The settlement notes that Apple offers paid content on free games that are rated appropriate for children older than 4, 9 and 12 in its App Store.
In 2011, Apple revised its in-app purchasing policy, requiring users to re-enter their account password before paying for enhancements within games. The lawsuit was filed after that policy change, with plaintiffs arguing that it didn't go far enough since minors could still make purchases.