The Federal Trade Commission (FTC) has settled with mobile advertiser Tapjoy, Inc. (“Tapjoy”) over allegations that it misled consumers by failing to provide in-game rewards that users earned by completing its advertising offers. According to the FTC’s complaint, Tapjoy offered users in-game virtual currency for completing advertising offers like purchasing products or services, signing up for limited-time free trials, providing personal information, or completing surveys. In exchange, Tapjoy allegedly received commissions from its third-party advertiser clients.
The FTC further alleged Tapjoy was aware of these deceptive claims and had received “hundreds of thousands” of complaints from users who did not receive the rewards they were promised. Many consumers complained that they ended up spending a significant amount of money and/or revealed sensitive personal information because of these advertising offers. Rather than take steps to remedy the misleading claims, Tapjoy “implemented policies to discourage consumers from complaining, such as prohibiting consumers from submitting a complaint within 24 hours of completing an offer.”
As part of the proposed settlement, Tapjoy is prohibited from misrepresenting the rewards and terms of its advertising offers, and is required to monitor its advertisers in order to ensure the promised rewards are delivered. The consent agreement is subject to a public comment period, after which the FTC will decide whether to issue a final order. The FTC explained that each violation of such an order could result in civil penalties of up to $43,280.
The action against Tapjoy reveals a more intense scrutiny toward the mobile gaming market structure, particularly with in-app stores and advertising intermediaries. In a joint statement, Commissioners Rohit Chopra and Rebecca Kelly Slaughter warned that “when it comes to addressing the deeper structural problems in this marketplace that threaten both gamers and developers, the Commission will need to use all of its tools — competition, consumer protection, and data protection — to combat middlemen mischief, including by the largest gaming gatekeepers.” That said, the FTC’s proposed settlement reveals several important signals: a growing trend to regulate the mobile gaming industry as a whole; the materiality of consumer complaint volume; and the strong consensus for continued FTC enforcement, including financial penalties. With this in mind, gaming gatekeepers that have formal policies and procedures in place to facilitate accountability in connection with claims and practices are often better-positioned to respond to investigations and manage consumer requests or complaints. Lastly, the joint statement by the Democrat members of the Commission signals increasing recognition of the interplay between competition policy and consumer protection issues—a theme we expect may continue to emerge in the new administration.