Apple Faces Class Action Lawsuit in Relation to In-App Purchases

• Apple is taken to court over illegal gambling allegations concerning in-game loot crates.
• The plaintiffs consider these mechanisms to violate California’s gambling laws and ask for $5 million in damages.
• Depending on the court’s decision, we may see fundamental changes in the way things in the App Store work.

Apple is facing yet another class-action lawsuit that was filed late last week in the U.S. District Court in San Jose. This is a judicial action that could have widespread consequences over the way things work in the App Store, as it is based on the illegal nature of in-app purchases, loot boxes, and gambling-related purchase mechanisms that are present in many games on the store. Many of these game apps target the younger audience, who are more susceptible to impulsive purchases, developing a gambling addiction, and charging large amounts of money on their parents’ accounts while leaving them no way to revert the payments.

The plaintiff, Rebecca Taylor, is demanding $5,000,000 in damage compensation, accusing Apple of the following:

• Unlawful and Unfair Business Practices in Violation of California’s Unfair Competition Law
• Unfair and Deceptive Acts and Practices in Violation of California’s Consumers Legal Remedies Act
• Unjust Enrichment

The legal action sits upon the provisions of the California Penal Code, which bans all machines, devices, and apparatuses that may be converted into a slot machine, or used in a way that resembles one. The whole concept of the loot boxes/crates is based on the setting up of a “rare items hunt” through the payment of real money. These scarce items are hard to acquire, so it takes players a long time and a significant investment without any guarantee that they’ll ever get what they’re after. This has massive psychological effects on adolescents and also raised chances of locking them in spending sprees. In just a couple of hours, younger gamers may end up emptying entire bank accounts without realizing the consequences of their actions in the real world, their families, and their lives.

Apple admits that loot boxes are essentially a form of gambling, and compels developers to disclose the odds of winning the various rarities of the crates, so at least the players know what their chances are. Apple is not directly responsible for the creation of these mechanisms, but they are making a lot of money thanks to these systems. 30% of all in-app purchases on the App Store go straight to Apple, so you can get the picture.

All that said, this case will more or less decide if loot boxes will continue to be allowed on the App Store, or if they will be deemed illegal. This will have fundamental effects on the profits of both the app developers and Apple, and the former will be compelled to find new ways to convince players to spend more on virtual content. From our point of view, adopting stricter policies specifically for children using the devices while still allowing loot boxes for adult players should be a good median solution, albeit one with practical complexities.