Regulators sue Amazon over app charges

 

Regulators are suing Amazon for millions of dollars, claiming the company allowed children to make unauthorized purchases in its app store.

The Federal Trade Commission (FTC) said Amazon failed to get parental consent when children spent their parent’s money while using apps and failed to quickly and effectively address consumer complaints about the resulting charges.

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Through the Amazon app store, children could spend “unlimited amounts of money,” and the company kept 30 percent of app store charges, according to the agency.

“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 Thursday 

“Even Amazon's own employees recognized the serious problem its process created,” she said.

With the lawsuit, the FTC is pressuring the tech company, which operates Kindle devices and the corresponding app store, to change its practices and refund millions to users who were charged without their consent.

“Many millions of dollars were spent on these unauthorized charges” and have not yet been refunded, Jessica Rich, director of the FTC’s Consumer Protection Bureau, said during a press call Thursday.

According to Rich, the FTC will determine the exact amount Amazon would have to refund customers as it proceeds with the lawsuit.

“For a more specific number you’ll have to stay tuned and see what we discover in litigation,” she said.

The agency’s claims come after it brought a similar case against Apple earlier this year.

In January, Apple agreed to change its app store policies and pay $32.5 million in refunds to parents whose children made in-app charges without their parents’ consent.

In that case, the FTC charged Apple of allowing children to spend real money on virtual products — costing between 99 cents and $99.99 — within apps.

While parents would often be required to enter their passwords, they did not realize they were authorizing their children’s purchases for the following 15 minutes, the agency said.

But Amazon appears less ready to settle and agree to a consent order than Apple was.

In a letter to Ramirez last week, Amazon defended its app store practices and pushed back on the agency’s legal pressure.

“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,” the letter said.

“Our experience at launch was responsible, customer-focused and lawful, including prominent notice of in-app purchasing, effective parental controls, real-time notice of every in-app purchase and world-class customer service.”

The FTC claimed that Amazon made incremental improvements to its app store policies since in-app charges were first allowed in 2011.

“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,” the agency said.

Like with the Apple case, the only one of the FTC’s five Commissioners to oppose the vote was Republican Joshua Wright. 

-- This post was updated at 2:45 p.m.