Amazon.com wrongly billed parents for unauthorized app purchases made by children, the Federal Trade Commission alleged in a suit filed Thursday in U.S. District Court for the Western District of Washington.
The suit “highlights a central tenet of consumer protection: Companies need to get consumers’ consent before placing charges on their bills,” said Jessica Rich, director of the Bureau of Consumer Protection, in a conference call with reporters.
According to the FTC, Amazon made “many millions” by allowing children—playing games on Kindle or mobile devices using the Android system—to make in-app purchases of virtual items such as acorns or stars for use in the games.
“With just a click or two, kids could place charges on their parents’ accounts without approval. Moms and dads were shocked to find out that every click added a charge of between 99 cents and $99 to their credit cards,” according to FTC senior attorney Lesley Fair writing in the FTC’s Business Center blog.
The suit is similar to one that the FTC brought against Apple Inc. in January. Apple agreed then to pay at least $32.5 million in consumer refunds to settle allegations of billing parents for unauthorized charges incurred by their children in kids’ mobile apps.
Both Apple and Amazon were hit with the same charge: unfair billing practices in violation of Section 5 of the FTC Act. Last week, the FTC also sued T-Mobile USA Inc. for unfair billing practices, alleging that the company added bogus charges to consumers’ phone bills.
“We are very concerned about the issue of unauthorized charges,” Rich said.
The FTC wants Amazon to issue refunds to consumers for unauthorized charges, disgorge ill-gotten profits, permanently refrain from billing parents and other account holders for in-app charges without consent and pay the FTC’s legal costs. According to the FTC, Amazon pockets 30 percent of all in-app charges.
Amazon associate general counsel Andrew DeVore in a July 1 letter to FTC Chairwoman Edith Ramirez wrote that the company’s policies were “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.”
DeVore continued, “Pursuing litigation against a company whose practices were lawful from the outset and that already meet or exceed the requirements of the Apple consent order makes no sense.”
The FTC in its complaint cites comments by Amazon’s in-app charge project manager, who reportedly said that “[W]e believe that parents are excluded from the buying process for these apps.”
The FTC also said Amazon in March 2012 began requiring password entry to confirm in-app charges exceeding $20. According to the FTC, Amazon’s Appstore manager noted “it’s much easier to get upset about Amazon letting your child purchase a $99 product without any password protection than a $20 product.”
FTC Commissioner Joshua Wright voted against bringing the case against Amazon, and he also opposed the action against Apple.
In the Apple case, Wright wrote that “although Apple’s allegedly unfair act or practice has harmed some consumers, I do not believe the commission has demonstrated the injury is substantial.”
Senator Deb Fischer, R-Neb., on July 9 wrote to the FTC, noting that the app marketplace is new and to “pursue enforcement against these companies for specific policies in place at the market’s nascent stage would constitutes a de facto tax on innovation that threatens future growth and opportunity.”