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Amazon refuses to settle with FTC over in-app purchases, says it's ready for legal fight

Amazon refuses to settle with FTC over in-app purchases, says it's ready for legal fight

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Amazon won't submit to the FTC's demands over in-app purchases made by children. Yesterday, the company sent this letter to the FTC warning that it's prepared to engage the commission in a courtroom fight over the issue. Bowing to the FTC's wishes would require Amazon to pay significant fines and reach a settlement modeled after the one Apple announced earlier this year. In January, CEO Tim Cook said his company decided against "a long and distracting legal fight" with the FTC, instead choosing to pay out a total of $32.5 million to 37,000 customers who claimed that their kids had made in-app purchases without permission. Apple also put in place new App Store safeguards that require explicit parental consent when buying virtual goods.

But Amazon refuses to settle in similar fashion. The two parties have met in recent weeks for talks that Amazon describes as "constructive." But it seems they've been unable to reach an amicable agreement. "The commission's unwillingness to depart from the precedent it set with Apple despite our very different facts leaves us no choice but to defend our approach in court," said Amazon lawyer Andrew DeVore.

Amazon is willing to challenge the FTC

The company insists it's already doing plenty to stop kids from blowing their parents' money on in-app purchases, which often take the form of new levels or additional power-ups in mobile video games. Amazon says it clearly highlights apps and games that offer IAPs. It's also implemented real-time notifications and parental controls capable of preventing unwanted charges. "In-app purchasing was and remains a new and rapidly evolving segment, and we have consistently improved the customer experience in response to data," DeVore said.

In the FTC's mind, none of those solutions came quickly enough. The commission says "thousands" of consumers have complained about charges they never agreed to. Amazon disagrees with the notion that it's only recently started to pay attention. "Even at launch, when customers told us their kids had made purchases they didn't want, we refunded those purchases," said DeVore. The squabble with the FTC comes just as Amazon prepares to release Fire Phone, its first smartphone, and one that will heavily feature the company's Appstore. But Amazon is hoping the commission will reconsider; it claims going the litigation route "makes no sense" and would be an "unfortunate misallocation" of FTC resources.