FTC Sues Amazon Over App Purchases by Children

The Federal Trade Commission (FTC) has filed a lawsuit against Amazon, claiming the retailer allowed children to make unauthorized purchases totaling millions of dollars in apps.

The FTC is asking that Amazon be required to refund parents for charges, which ranged from $0.99-99.00 per customer, mostly for visual items purchased within gamse. These purchases are "final and non-refundable" through Amazon. The company keeps 30% of each transaction. In one instance, a child racked up $350 of virtual goods in an app without her mother's knowledge.

The suit will be filed Thursday in US District Court.

Parents were billed "without consent, sticking (them) with unexpected bills in the hundreds of dollars," Jessica Rich, director of the FTC's consumer protection bureau, said. "We are seeking this money back for consumers as well as an order preventing the company from billing consumers without their permission in the future."

The company began allowing in-app purchases in November of 2011. At that time there were no measures taken to prevent children from making purchases on their parents' accounts, such as a password requirement. According to Brett Molina for USA Today, employees were aware of the issue within the first month. One employee stated that the policy was "clearly causing problems for a large percentage of our customers.

Amazon began requiring a password for in-app purchases of more than $20 in March of 2012.

"What Amazon did not tell consumers is that entering a password would open a window of 15 minutes to an hour, in which children would rack up unlimited charges without parental involvement," Rich said.

The FTC maintains that by offering in-app purchases through children's apps, the company is in violation of an FTC act protecting customers from unfair and deceptive business practices. These games urged children to purchase virtual items through a virtual currency that was not clearly labeled as real money, writes Grant Gross for PC World.

Ice Age Village, a children's app, allows children to use acorns to purchase items within the game without using real money. However, in-app purchases that require real money use a visually similar screen. One such purchase could total as much as $99.99.

In a letter sent to the FTC on July 1, Amazon denied the allegations. The company reports having "effective" parental controls in place and offering real-time notices when in-app purchases were made.

"We have continuously improved our experience since launch, but even at launch, when customers told us their kids had made purchases they didn't want we refunded those purchases," wrote Andrew DeVore, Amazon's associate general counsel.

In January the FTC reached an agreement with Apple for $32.5 million in a similar lawsuit. Apple agreed to stricter password requirements for its in-app purchases.

07 5, 2014
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