Difficult or impossible to cancel or get a refund for mobile in-app payments

- Improvements are needed for compliance with guidelines for protecting mobile content users -

    With the rapid growth in the domestic mobile application market*, consumer damage related to mobile apps is also increasing. In this regard, the Korea Consumer Agency (President Hee-sook Lee) conducted an analysis on mobile app-related damage redress cases reported to the KCA, and an investigation of the transactions conditions of mobile apps that sell content through in-app payments**, etc. According to the results obtained from the analysis and investigation, there were many cases where cancelling and/or refunding payments for paid content was refused, and cancellations and/or refunds of in-app payments for digital content were more difficult than those of general payments through credit cards, etc.

* The domestic sales volume of mobile content in 2017 stood at ￦10,038,000,000,000 (the current state of the mobile Internet industry in 2017, Korea Mobile Internet Business Association(MOIBA))

** In-app payments: a mobile-based payment method provided by mobile app store operators including Google Play Store and Apple App Store

□  The most common cause for mobile app-related consumer damage was related to ‘refusal to cancel and/or refund payments.’

    The analysis on a total of 572 mobile app-related damage redress cases* reported to the KCA for the past three years (2015~2017) revealed that ‘refusal to cancel and/or refund payments (304 cases or 53.2%)’for paid content accounted for the highest number of cases, followed by ‘system error (64 cases or 11.2%),’and ‘non-fulfillment of contract (61 cases or 10.7%),’such as no provision of the content purchased, etc.

* (by year) 122 cases in 2015 → 172 cases in 2016 → 278 cases in 2017

□ There are many cases where consumers cannot cancel and/or get a refund for the remainder of the paid content purchased through in-app payments.

    And the investigation of the paid content sales of 45 mobile apps* registered with major app markets (Google Play Store, Apple App Store) found that in the Google’s app market, all of the investigated mobile apps (45) were selling paid content, and in the Apple’s app market, only 40 investigated mobile apps were selling paid content.

* 45 mobile apps including game (10 apps), webtoon (10 apps), music (10 apps), social (10 apps), media (5 apps)

    With regards to payment methods provided by the mobile apps that sell paid content, among the 45 apps registered with the Google’s app market, 24 apps accepted ‘in-app payments’only, 12 allowed only ‘general payments (payments through credit cards, mobile phones, etc.),’ and 9 allowed both ‘in-app and general payments.’And all of the 40 apps registered with the Apple’s app market accepted only in-app payments, restricting a consumer’s right to choose.

[ Current Status by Payment Method to Purchase Paid Content ]

    In addition, the result of the investigation on whether consumers could withdraw from contracts* for paid content showed that 39 (86.7%) out of the 45 mobile apps investigated allowed withdrawals from contracts, but in the case where a portion of the paid content purchased was used, all of the 45 investigated mobile apps did not allow contract withdrawals even during a 7-day cooling-off period.

* (contract withdrawal) a method to cancel a contract without having to pay penalties or damages for breach of contract, within the set time limits. Refunds may be full (if the purchased content has not been used, the full amount paid will be refunded) or partial (if a portion of the purchased content has been used, the remainder after deducting the amount used will be refunded).

    Furthermore, according to the investigation on whether a cancellation and/or refund of the remainder left after the content purchased was partially used was possible, 13 apps (28.9%) registered with the Google’s app market and 11 apps (27.5%) registered with the Apple’s app market allowed the remainder cancellation and/or refund. In particular, it was also found that in the case of in-app payments, cancellations and/or refunds were more difficult than general payments through credit cards or mobile phones.

※ In comparison with the service providers offering the same kind of online content services on PCs (5 service providers (game), 3 service providers (music)), all of the 8 PC content service providers allow cancellations and/or refunds while only 3 mobile apps allow them.

□ Improvements are needed for compliance with the Guidelines for Protecting Content Users.

    With a view to establishing an environment for sound transaction and distribution of content and protecting content users, the Guidelines for Protecting Content Users (Ministry of Culture, Sports and Tourism Public Notification No. 2015-10) set out requirements to be voluntarily complied with by content service providers. In this regard, an investigation was conducted on whether mobile app service providers properly observed four (4) certain requirements* set out by the Guidelines, including whether they provided easy-to-read versions of important information to consumers, and the investigation result showed that only 5 (11.1%) out of the 45 investigated app service providers complied with all of the four requirements.

    Based on the investigation results, the KCA recommended mobile app service providers to observe the Guidelines for Protecting Content Users, and among them, 16 service providers responded to the recommendation with their plans for improvement. Going forward, the KCA will also strengthen its mobile market surveillance to promote consumers’ rights and interests related to mobile transactions.