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FTC Sues Amazon Over In-App Purchases Made by Kids

Thu, 07/10/2014 - 2:30pm
Ben Munson

The Federal Trade Commission is suing Amazon over unauthorized in-app purchases made by children.

The FTC is seeking refunds for consumers and is looking to permanently stop Amazon from billing account holders for purchases made without their consent. According to the complaint, Amazon keeps 30 percent of all revenue from in-app purchases.

“Amazon’s in-app system allowed children to incur unlimited charges on their parents’ accounts without permission,” FTC Chairwoman Edith Ramirez said in a statement. “Even Amazon's own employees recognized the serious problem its process created."

The Commission’s complaint alleges that when Amazon introduced in-app charges to its Appstore in November 2011, it didn’t bother with password requirements for in-app charges in kids’ games and other apps. The complaint makes an example of “Ice Age Village,” a game that allows the player to buy virtual items and carries single charges of up to $99.99.

The complaint alleges that Amazon updated its in-app charge system to require a password only for individual in-app charges over $20. In 2013, Amazon updated its system again to require parental authorization but allowed purchases without further authorization for 15 minutes to one hour after.

“Not until June 2014, roughly two and a half years after the problem first surfaced and only shortly before the Commission voted to approve the lawsuit against Amazon, did Amazon change its in-app charge framework to obtain account holders’ informed consent for in-app charges on its newer mobile devices, as explained in the complaint,” the FTC wrote in a press release.

The Commission alleges thousands of parents complained to Amazon about their kids making in-app purchases and that the complaints amounted to millions of dollars of charges.

The FTC says this is its second lawsuit regarding unauthorized in-app purchases, following a similar suit against Apple that was settled earlier this year.

Today’s lawsuit against Amazon comes shortly after the FTC filed suit against T-Mobile over a fraudulent text message charging practice known as cramming. In that suit, the FTC alleges T-Mobile had sufficient evidence of its customers being wrongly charged for premium SMS services but did not act quickly enough to end the practice.

T-Mobile CEO John Legere said that his company is being unfairly targeted by the FTC. Likewise, Amazon has issued a response to the FTC, saying it is disappointed the Commission is using the same precedent from the Apple lawsuit to come after Amazon. Amazon said it has no choice but to defend itself against the charges.

Amazon alleges that since launch of in-app purchasing that it has refunded purchases that customers complained were made without authorization. The FTC clarified in a call with the media that it believes that many of those customers have still not received refunds.

The FTC would not say if it was going after any other companies concerning unauthorized in-app purchases. The FTC insisted it was more than capable of handling simultaneous large lawsuits as it is now with T-Mobile and Amazon.

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