Regulator PhonepayPlus has fined Moscow-based Connect Ltd 50,000 for misleading UK Android users about the cost of using its gaming app.
The application provided users with access to a range of smartphone games.
When users agreed to download the app, a text message was sent, which resulted in them being charged a 10 fee.
However, the app's UK pricing information, located on the sixth page of its terms and conditions, told users to anticipate a charge of around five pounds for using the service.
Refunds should be directly credited to the users' mobile accounts.
Phone-paid service watchdog PhonepayPlus received 10 complaints about the app between February and April 2012.
In an adjudication, published on the regulator's website, PhonepayPlus confirmed that consumers had spent up to 250,000 on app downloads.
The organisation also confirmed that Connect Ltd's actions had breached four parts of its code of conduct by taking payments without consent, misleading users and for not clearly stating what they would be charged.
"The tribunal concluded that the seriousness of the case should be regarded overall as very serious," stated the adjudication document.
As a result, the firm has been ordered to pay a 50,000 fine and must offer refunds within three months to all users of the service, even if they have not requested one.
"Refunds should be directly credited to the users' mobile accounts and...evidence [must be provided] to PhonepayPlus that the refunds have been made," it added.
Graham Cluley, senior technology consultant at security vendor Sophos, said the case highlights the importance of reading smartphone app terms and conditions.
"That said, in this case users were told that the fee would be less than it actually was," he said. "Always be careful about what apps you install, and in the case of Android apps be sure to check that you are happy with the permissions the app requests at installation."
