Cheaper in-app purchases... tempting but what is at stake?

With the global lockdown and travel restrictions in place, we are seeing an increase in online activities – social media, streaming entertainment, digital banking, video conferencing, food delivery, games and so much more. Many of these activities heavily rely on mobile applications – "apps".

While apps touch on many facets of our daily lives and businesses, in this article we will look at the topic of unauthorized in-app purchases in games.

What are in-app purchases

You may wonder how app developers make money if the game apps are available for download free-of-charge. Out of the many ways to monetize an app (such as showing ads and offering free trials before charging for subscriptions), this article focuses on income generated from in-app purchases.

In-app purchases in games may come in the forms of:

1. Consumables: game currency, extra health points or chances in a game, costumes/ skins for characters, upgrades to functionalities etc.
2. Non-consumables: remove ads, upgrade to full/premium content, unlock bonus levels etc.

Payment is typically made through the app stores, with the sum distributed among app stakeholders.

Cheaper ways to buy?

Unfortunately, there are people who create cheats and monetize unauthorized in-app purchases. 

By way of illustration, some websites claim to provide cheats, hacks or "legitimate" ways to charge game currency on your behalf at just a fraction of the official price you see in-app.

Such offerings might run into legal issues such as:

• Money laundering
• Usage of fake credit cards
• Fraudulent refunds (claiming that the currencies did not come through after payment when in fact they did)
• Hacking into the app algorithms

These unauthorized offerings may prejudice the financial success of the legitimate game developer, e.g. through a decrease in the number of people buying the authorized in-game contents.  They may also threaten the security of online accounts as many of these in-app purchases would require sign-ins, passwords or even identify verification.

Watch out!

There are a variety of actions that legitimate app developers and operators can take against these unauthorised in-app purchases. For example, app developers and operators can consider:

1. Whether there is a breach of app/game user agreement which may trigger account suspension.
2. Whether there is infringement of intellectual property rights (e.g. app trademark, copyright).
3. Whether there are criminal activities involved, e.g. money laundering, unauthorised bank currency remittance or fraud.

Are you seeing suspicious in-app purchases hurting your app? Please do reach out to your Hogan Lovells contact to see how we can help.

Authored by Eugene Low and Charmaine Kwong.