The Federal Trade Commission announced on Jan. 7 a settlement (by way of an administrative complaint) with a California-based company that operates an advertising platform within mobile game applications.
According to the complaint, the company promotes offers of in-app rewards, identified as “virtual currency.” Consumers complained that they did not receive the promised rewards.
The FTC asserted that the company failed to provide the promised rewards as advertised and failed to monitor its third-party advertisers to ensure that the consumers obtained the promised rewards. Furthermore, the consumers provided personal information, which was later sold to additional parties, of which the consumers complained resulted in a barrage of spam emails and telemarketing calls.
According to the FTC, the company generates revenue through “network fees and commissions from third-party advertisers that engage with consumers through [the] platform.” The company then pays a separate commission to the game developer.
One way that consumers obtain the virtual currency is through an in-game display, the “offer wall.” A consumer can obtain virtual currency by completing an act that is designated through a third-party advertiser on the offer wall.
Through a process of pop-up windows, the platform will instruct consumers to comply with a further action to earn the virtual currency. This offer includes watching a video to sign up for a free trial offer of service. In order to obtain the rewards through the referral system, the consumer is frequently required to disclose personal information.
The Commission voted 5-0 to issue the administrative complaint and accept the consent agreement. An administrative complaint is issued when the FTC Commission determines that there is a “reason to believe” that the law has been or is being violated.
A statement issued by FTC Commissioners provides insight into the rise of regulators holding “gatekeepers” responsible for the actions of third parties by requiring that such companies do not facilitate deception. Interestingly, the statement criticizes platforms that engage in “trickle down” abuse of not only consumers but developers who are prey to “rent extraction” and retaliation. The overall structure of an in-app purchase model creates “loot boxes” that “deploy dark patterns and other deceptions to lure gamers — often children — into purchasing in-app rewards of randomly assigned value, turning video games into virtual casinos.” Such ideals are reflected in the FTC’s perspective paper issued in August of 2020 regarding the Video Game Loot Boxes Workshop.”
Link to FTC announcement; Link to Complaint; Link to Commissioner Statement; Link to Perspective Paper on Video Game Loot Boxes.
