FTC sues Amazon over in-app purchases

By Ananth Baliga  |  July 10, 2014 at 3:18 PM
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WASHINGTON, July 10 (UPI) -- The Federal Trade Commission sued Amazon Thursday for billing parents millions of dollars for unauthorized in-app purchases made by their children.

The FTC filed a suit in U.S. District Court for the Western District of Washington seeking an order that Amazon pay back parents for such purchases and also force the company to require parental consent for such purchases in the future.

In-app purchases typically include add-ons that customers can buy once they purchase the app. This could be extra coins or energy in games, something that is targeted to attract customers to play more. Children were found to have purchased these items without restraint on Amazon, as the store did not require a password to authenticate the purchase.

Amazon refused to settle with the FTC, promoting the filing of a suit by the latter. Amazon instead said it wold fight the agency in court and said that it has consistently improved its customer services in response to customer feedback.

The FTC pointed out that Amazon made it difficult for children to realize they were buying virtual items with real money and also encouraged the act.

The federal agency claims that Amazon was aware of the unauthorized purchases and an internal memo suggested that allowing unlimited in-app purchases was "clearly causing problems for a large percentage of our customers."

"Amazon's in-app system allowed children to incur unlimited charges on their parents' accounts without permission," FTC Chairwoman Edith Ramirez said in the release. "Even Amazon's own employees recognized the serious problem its process created. We are seeking refunds for affected parents and a court order to ensure that Amazon gets parents' consent for in-app purchases."

Amazon in response limited the amount of in-app purchases without authorization to $20 in 2012, which still meant that kids could spend $20 without their parent's consent. In 2013, they changed their processes, requiring a password for in-app purchases but only in certain contexts. This context was unclear. Even when a parent authorized a purchase it would open an undisclosed window of 15 minutes to an hour where kids could make unlimited purchases.

The lawsuit comes months after Apple agreed to pay $32.5 million to customers for unauthorized in-app purchases. The FTC had charged Apple with allowing in-app purchase without parental consent, in violation of the FTC Act that prohibits unfair and deceptive business practices.

Apple recently complained that Google was allowing similar kinds of in-app purchases in its mobile app store.

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