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FTC Sues Amazon Over In-App Purchases – They Should Have Seen that Coming

6192822061_e3907a1a21_b[1]Both Apple and Google have faced criticism over the years for their policies concerning in-app purchases, and now it’s Amazon’s turn.

The Federal Trade Commission announced this morning that it was suing Amazon on behalf of parents and other Amazon customers who had experienced unauthorized in-app purchases via their Amazon accounts.

The FTC is seeking the refund of "millions of dollars in unauthorized in-app charges incurred by children" spent on Amazon’s Kindle Fire Android tablets as well as in apps acquired via the Amazon Appstore. This lawsuit comes only a few months after a simialr class action lawsuit was filed against Google, and follows Apple settling with the FTC in January. Apple also settled a class action lawsuit in February 2013.

"Amazon’s in-app system allowed children to incur unlimited charges on their parents’ accounts without permission," said FTC Chairwoman Edith Ramirez. "Even Amazon’s own employees recognized the serious problem its process created. We are seeking refunds for affected parents and a court order to ensure that Amazon gets parents' consent for in-app purchases."

In-app purchases have been the bane of parents since at least 2010, so when Amazon added the option to the Amazon Appstore in November 2011 they probably should have know something would go wrong. But even if Amazon didn’t, the FTC says that Amazon was aware of the problem since December 2011, and allowed it to persist to some degree until 2014.

According to the press release, internal Amazon emails circulated as early as December 2011 that said allowing unlimited in-app charges without any password was "clearly causing problems for a large percentage of our customers".

Like the other major app stores, Amazon added in-app purchases in order to enable developers to offer free apps and then charge for features and improvements inside the app. While many in-app items cost $.99 to $4.99, some cost as much as $99.99.

Unfortunately, some developers (including Amazon) have exploited this feature to both make players pay to fix broken gameplay as well as well as take advantage of unwary users. All of the major app stores have had complaints about this, and they’ve all taken minimal steps to fix it.

Google, for example, added a password requirement – but they also left a 30 minute window where no password would be required (it’s the focus of the class action lawsuit).

Amazon has also taken minimal action (you wouldn’t want to hurt the cash cow, would you?). The FTC says that in March 2012 Amazon updated their in-app purchases system to require an account owner to enter a password for individual in-app charges over $20. Any charge for less than $20 did not require t a parent’s approval.

Amazon then changed their policy again in early 2013 to require a password confirmation for some charges in a way that functioned differently in different contexts. I can’t confirm this, but the FTC alleges that a single authorized purchase "opened an undisclosed window of 15 minutes to an hour during which the child could then make unlimited charges without further authorization".

It wasn’t until June 2014, shortly before the FTC decided to file suit, that Amazon changed their policies to meet FTC requirements.

As was reported last week in the WSJ, Amazon is planning to defend their policies in court. Citing Amazon’s generous return policy, Amazon denied that there was a serious issue.  "When customers told us their kids had made purchases they didn’t want, we refunded those purchases," said Andrew DeVore, an Amazon associate general counsel, in the letter to the FTC.

The FTC is reportedly seeking "fines and additional record-keeping and disclosure requirements over the next 20 years", so I can see why Amazon would want to fight. But I also don’t see that they have much of a chance of winning this case.

It was a well-known fact when Amazon launched this feature that in-app purchases were a vexing problem, and if the FTC really has evidence that Amazon knew of the problem and didn’t fix it then Amazon has already lost the lawsuit.

image by drewgstephens

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Chris Meadows July 11, 2014 um 12:42 am

What? How can this be? I thought the Obama Administration thought Amazon could Do No Wrong, and was focused on enabling its monopoly via suing everyone else instead!

Mike July 11, 2014 um 1:55 am

Sometimes they can’t wiggle out –

Ebook Bargains UK July 11, 2014 um 5:53 am

Add to this two Amazon associates killed in the past six months in Amazon warehouses and one begins to wonder just how far Amazon will push legal boundaries.

In the first instance Amazon was not cited for H&S failings because, while they dictate every detail of the warehouse operation they use agencies to actually run the show, keeping distance between them and any fall out. The second investigation has yet to be concluded.

Amazon is under investigation yet again by the EU for its tax-avoidance schemes and faces numerous other investigations, most of which may well be frivolous or lost-causes, but which collectively cast a dark shadow.

Sadly the penalties for any misconduct will be loose change to companies of this scale.

In the case of the first Amazon associate death the penalty per agency amounted to just $6,000.

On the bright side Amazon did express their sincere condolences.

kurt July 11, 2014 um 12:24 pm

Oh please
This is not the parents fault for giving their kids unsupervised access to their accounts or not investigating what apps they are using and what you can do with them?
Oh wait that’s right, it is never the individuals fault

Valentine July 11, 2014 um 5:08 pm

They have a "generous return policy", meaning they already know whose fault it is.

Amber July 11, 2014 um 5:38 pm

So it is Amazon and all these other companies that have already got nailed to police other peoples kids? Sorry but parents should actually take some responsibility if not with their attention then their pocket books for the actions of their kids. I really don’t think these companies and just Amazon should be responsible for other peoples mistakes.

Nate Hoffelder July 11, 2014 um 7:33 pm

Or at least give parents the tools to police their own kids.

Kid-safe modes have been an established concept in software literally for decades, and yet the app stores launched without them. I can see why that is viewed as negligence. I for one think that the controls were intentionally left out in order to enable more sales.

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