FTC Alleges Amazon Unlawfully Billed for Unauthorized In-App Charges

This blog entry was co-authored by Eric Huang, Summer Law Clerk.

The FTC’s complaint seeks refunds to consumers for the unauthorized charges and  permanently banning the company from billing parents and other account holders for in-app charges without their consent. Amazon offers many children’s apps in its Appstore for download to mobile devices such as the Kindle Fire. In its complaint, the FTC alleges that Amazon violated the FTC Act by billing parents and other Amazon account holders for charges incurred by their children without the permission of the parent or other account holder. Amazon’s setup allowed children playing these kids’ games to spend unlimited amounts of money to pay for virtual items without parental involvement.

More specifically, the complaint alleges that when Amazon introduced in-app charges to the Amazon Appstore in November 2011, there were no password requirements of any kind on in-app charges, including in kids’ games and other apps that appeal to children. According to the complaint, this left parents to foot the bill for charges they didn’t authorize.

The complaint notably highlights internal communications among Amazon employees that said allowing unlimited in-app charges without any password was “…clearly causing problems for a large percentage of our customers,” adding that the situation was a “near house on fire.” According to the complaint, thousands of parents complained to Amazon about in-app charges their children incurred without their authorization, amounting to millions of dollars of charges. The company’s stated policy is that all in-app charges are final and nonrefundable. According to the complaint, even parents who have sought an exception to that policy have faced a refund process that is unclear and confusing, involving statements that do not explain how to seek refunds for in-app charges or suggest consumers cannot get a refund for these charges.

This is the second case relating to unauthorized in-app purchases by children. Before this, the FTC accused Apple, Inc. of charging unauthorized in-app purchases by children. The case was finally settled earlier this year, and Apple agreed to pay at least $32.5 million back to customers.

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