In a lawsuit filed by the Federal Trade Commission (FTC), Amazon.com is accused of unlawfully charging parents millions for in-app purchases made by their children. The FTC is seeking a court order requiring Amazon to refund customers for accidental in-app purchases. For most parents, seeing a random $358 charge on their credit card bill would elicit a lot of questions. But for the parents of the 71 percent of children who play mobile games such as Angry Birds or Temple Run, those seemingly random charges are becoming more common as the games allegedly “trick children into buying virtual goods with real-world money.” That’s why the FTC says it sued Amazon.com, alleging that the online retailer unlawfully billed parents millions of dollars for the mobile games’ in-app purchases inadvertently made by their kids.
In the complaint, filed in U.S. District Court in Washington state, the FTC alleges that thousands of parents — including one consumer whose daughters racked up $358 for in-game charges — fell victim to a system that allows charges without any step “that requires a password to validate payment information.” The FTC is seeking a court order requiring Amazon to refund customers for “millions of dollars” in unauthorized charges and to ban the company from billing parents for in-app charges made by children without parental consent.
According to the complaint, many of the “kid-friendly” games and apps on Amazon mobile devices such as the Kindle Fire encourage children to pay for virtual in-game items with real-world money, usually connected to their parents’ credit cards. It’s alleged that games such as “Tap Zoo,” where children populate a virtual zoo with various animals, require kids to pay for animals and other game objects in “coins” or “stars,” some of which are paid through in-game currency and some by real-world credit card charges. Jessica Rich, FTC consumer protection director, says they “are really trying to make clear that this cardinal rule … of consumer protection applies in the mobile space.” She said Amazon had received thousands of complaints and millions of dollars in revenue from accidental app purchases.
This isn’t the first time the FTC has gone after app stores for failing to provide adequate protection for parents — the regulatory body reached a settlement with Apple in January for similar issues. Apple refunded about $32.5 million to parents and changed billing practices to require more stringent password protection. A class-action lawsuit was filed against Google in March by parents over unauthorized charges for in-game apps.
It’s alleged in the recent suit that Amazon collects 30 percent of all in-app charges and has made tens of millions of dollars through general in-app purchases, and that it did not require password certification on in-app purchases when the company launched the service in November 2011. In 2012, Amazon added a password requirement for any in-app purchases exceeding $20 and in 2013 added the requirement for all in-app purchases. However, according to the FTC, changes were made slowly and the company’s refund policy was too byzantine for even the most dogged consumers.
Hudson Kingston, legal director of the Center for Digital Democracy, said the lawsuit should make more companies aware of the downsides of levying hidden costs such as in-app purchases on consumers. He added that “It’s better to have a customer that is happy and knowingly spending $5 on an app than having a lawsuit with the FTC.” That is a pretty good assessment of the situation, but it fails to factor in “corporate greed.”
Source: Associated Press
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