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FTC suing Amazon over children's in-app purchases

FTC suing Amazon over children's in-app purchases

Fri 11 Jul 2014 7:12am GMT / 3:12am EDT / 12:12am PDT
Legal

US govt body seeks full refunds for all affected customers

Amazon

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The US Federal Trade Commission has filed a court case against Amazon over "millions of dollars in unauthorized in-app charges incurred by children."

The government body believes that a lack of restrictions over what can be bought by the users of apps has lead to huge bills being racked up by children who don't understand, or care, that they're spending real money without their parent's permission. Announcing the case yesterday, the FTC said that it would be seeking full refunds for all customers affected.

"The FTC's lawsuit seeks a court order requiring 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," the posting reads. "According to the complaint, Amazon keeps 30 percent of all in-app charges.

"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 within the apps such as 'coins,' 'stars,' and 'acorns' without parental involvement."

When in-app purchases were introduced by Amazon in November, 2011 there was no need to enter a password to authorise them. This was updated in March, 2012, but only introduced the necessity for a password in purchases of $20 and above. Further changes to the system, in 2013, still failed to appease the Commission.

"In early 2013, Amazon updated its in-app charge process to require password entry for some charges in a way that functioned differently in different contexts," the FTC statement continues. "According to the complaint, even when a parent was prompted for a password to authorize a single in-app charge made by a child, that single authorization often opened an undisclosed window of 15 minutes to an hour during which the child could then make unlimited charges without further authorization. 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, as explained in the complaint."

This is the second such case pursued by the FTC, which also forced Apple to repay at least $32.5 million to its customers in a very similar case earlier this year.

12 Comments

Joshua Rose Executive Producer / Lead Designer, Storm Eagle Studios

191 81 0.4
Popular Comment
That's what happens when parents rely on technology to babysit their kids...

Posted:5 months ago

#1

Greg Knight Freelance Developer

56 49 0.9
Chump change to these guys.

Posted:5 months ago

#2

Paul Johnson Managing Director / Lead code monkey, Rubicon Development

961 1,760 1.8
This is depressing. I hate that I have to keep typing my password into my phone over and over again just because some poor parents give credit card details to their five year old.

They deserve everything they get imo. Is parental responsibility no longer a thing?

Posted:5 months ago

#3

Neil Young Programmer, Rebellion Developments

312 412 1.3
I'm not sure it's necessarily fair to blame the parents - I suspect in many (most?) cases they're entirely unaware that their children are able to purchase anything without their interaction. A level of supervision required to catch IAP is much higher than would be expected with most devices.

Allowing payments without any kind of authentication check is convenient for users, but (in the UK at least) leaves the merchant comparatively vulnerable to the transaction being disputed. Hopefully someone will figure out a good compromise that satisfies users, merchants and regulators.

Posted:5 months ago

#4

Andrew Goodchild Studying development, Train2Game

1,255 421 0.3
Whilsy conveniant to not enter a password, I was wary passimg my last phone to my kid when he was 7 because I didn't have an option to lock it (he's 9 now, I trust him more, and both my kids have tablets now anyway). It should be an option, highlighted at registration to require apassword or not. However, the kindle fire at least does have decent parental control options.

Posted:5 months ago

#5

Paul Johnson Managing Director / Lead code monkey, Rubicon Development

961 1,760 1.8
I completely disagree Neil, there's no "surprise" lurking here. When you get your phone and decide to use it to purchase something you have to put in your credit card details the first time. Possibly, maybe, more red flags and klaxxons should go off at this point, but this stage is here nonetheless.

After that point, the owner of the phone knows that that phone can be used to buy stuff. Which puts it ALL on the person who set that phone up and gave it to his five year old.

"I didn't know" is not just not an excuse, it's a damned blatant lie.

Posted:5 months ago

#6

Kamil Sappich , EA

6 0 0.0
Isn't this the same we read a few months ago?

I remember it was ruled for Apple to refund underage purchases, and they even agreed to do this beforehand anyway, no?

Posted:5 months ago

#7

Klaus Preisinger Freelance Writing

1,186 1,273 1.1
You wouldn't use your wallet for a pacifier, so why would you use a phone primed for one button purchases within a system that can't even verify whether the person pushing the buttons is of legal age to conduct a purchase or not? Nevermind, we understand the both of you all too well.

This one boils down to stupidity on the consumer end vs. sanctimonious ignominy on the business end. Which is pretty much the configuration required for anything to end up in court. Because neither Google nor Apple are going to implement a pacifier mode analog to an airplane mode.

Posted:5 months ago

#8

Nick Wofford Hobbyist

180 190 1.1
Paul,
I do firmly agree that these consumers are just not paying attention. But I do understand how they can be mislead, by watching my very technologically illiterate family members and their various devices. What happens is that they don't realize that a free game isn't really free. And when they hear about the game having "coins" (or any synonym for currency), they assume it to be fake money. They just don't understand that the initial download was free but not the in-game garbage.

Smartphones should require a license to be used. With a mandatory class on them.

Posted:5 months ago

#9

Hugo Trepanier Senior UI Designer, Hibernum

156 144 0.9
Popular Comment
I'm surprised at the amount of comments claiming that it is the parent's sole responsibility to verify their kids' every action. A child lock function seems essential to me. There's one on my oven. There's one on my DVR. There's one on my car. Why shouldn't there be one on my phone or tablet?

My son is only 1 year and 5 months old and he loves to swipe through the photos on my iPhone. I constantly have to stay next to him to make sure he doesn't inadvertently delete stuff, or launch into another app (because it's so easy to do). With older kids it can only get worse since they'll want to play games on their own and then they'll still have the ability to do things the parent wouldn't want them to, such as hitting that "Buy" button. It only makes sense to have some kind of "Child Lock" option directly in the OS, so they can enjoy the product without abusing its versatility, and lock some features on demand.

I don't intend to lessen parents' responsibilities but anyone who claims a child lock is not a good idea is probably not a parent. Any parent knows it only takes a few seconds for a child to get into a tricky situation, either willingly or not, when you've got your head turned the other way. The only option you have is to be entirely dedicated to their supervision, yet we all know it is quite demanding to be 100% vigilant all of the time, or to not let them use these portable devices at all. Some form of parental control that allows a nice middle ground seems perfect to me.

Edited 1 times. Last edit by Hugo Trepanier on 14th July 2014 5:31pm

Posted:5 months ago

#10

Andrew Goodchild Studying development, Train2Game

1,255 421 0.3
Kindle Fire has Freetime (a kids'corner thing) and device password protection now, although I belive these were added with the current generation of Fires (this may be legacy cases), and I think protection for Amazon app store on other Android devices is not as easy.

Posted:5 months ago

#11

Paul Johnson Managing Director / Lead code monkey, Rubicon Development

961 1,760 1.8
@Hugo. A child lock is fine, but that's not what a constant requirement for a password is. The two things are not even vaguely connected.

Posted:5 months ago

#12

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