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FTC sues Amazon for letting children rack up in-app purchase bills

FTC sues Amazon for letting children rack up in-app purchase bills

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A week after Amazon rejected a settlement over in-app purchases, the FTC has filed suit against Amazon for allegedly letting children run up bills without parental approval. In a complaint, it asks a court to make Amazon refund users who were billed a total of "millions of dollars" in unauthorized charges, and for the company to be banned from billing parents or other account holders without more explicit consent. "Amazon's in-app system allowed children to incur unlimited charges on their parents' accounts without permission," says FTC Chairwoman Edith Ramirez. "Even Amazon's own employees recognized the serious problem its process created."

"We're clearly causing problems for a large percentage of our customers."

The agency says that when Amazon introduced in-app purchases in 2011, it did not require a password of any kind to buy things like game power-ups through its Appstore. In 2012, it changed its policy, but only for purchases larger than $20; users could buy any number of smaller purchases without entering a password. According to the complaint, it only applied the policy to purchases less than $20 in 2013, and even then, "Amazon's modifications took effect at different times for different device models and, in some instances, have operated in different ways for different apps and different account holders." After making a purchase, apps would wait some time to ask for a password again, so someone could explicitly authorize one purchase and then make more without approval.

In many cases, the people making these purchases would have been children, and the FTC argues that Amazon was very aware that people were running up bills without realizing it. "Amazon has received thousands of complaints related to unauthorized in-app charges by children in these and other games, amounting to millions of dollars of charges," says the complaint. "By December 2011, the month after Amazon introduced in-app charges, an Appstore manager commented that 'we're clearly causing problems for a large percentage of our customers,' describing the situation as 'near house on fire.'" Parents who requested refunds "faced significant hurdles," making it difficult to know whether there were exceptions to the general rule that all sales were final.

Amazon says the FTC shouldn't hold it to Apple's settlement terms

Apple's App Store has faced similar complaints. It chose to settle with the FTC in January, offering $32 million in customer refunds and agreeing to ensure its billing process required "express, informed consent" before charging a user. Though Amazon was in talks to do the same, it recently said that it would rather fight a legal battle than agree to the settlement. Calling the terms "disappointing," it chided the FTC for hewing too closely to the rules it set for Apple and ignoring "very different facts."

Outside the FTC, there's been significant debate about who bears responsibility when a child spends hundreds of dollars playing games. Developers can obscure the fact that a feature costs real money, asking players to use "coins" or some other abstract unit that parents say confuses children. In one example cited by the complaint, a parent said her daughter "thought she was paying with acorns, but it seems to be hitting my credit card." But even if the issue is deceptive game studios or parents who don't keep track of what a child is doing, the FTC says that unclear and incomplete password systems compound the problem greatly. "One consumer whose six-year-old 'click[ed] a lot of buttons at random (she can't read)' on her Kindle and incurred several unauthorized charges was 'shocked that there is no password protection' for in-app charges," it says. "Another consumer whose daughters incurred $358.42 in unauthorized charges complained that Amazon allowed the charges without any 'step that requires a password to validate payment information.'"