FTC Sues Amazon Over Kids' In-App Purchases

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The FTC says the giant e-tailer made millions of dollars from unauthorized purchases by children and that it didn't install the proper parental permissions to block the buys.

C’mon Amazon. You’re supposed to be a consumer-friendly company. What’s less friendly than making it easy for children to run up large, unauthorized charges using mobile apps? That’s exactly what the FTC is accusing Amazon of, and the agency filed suit against the company on Thursday. 

Amazon's Appstore is preloaded on the company's Kindle tablets and is available for download on array of Android smartphones and tablets. In a complaint filed in a U.S. District Court in Seattle, the FTC claims: “Amazon controls the billing process for in-app charges and retains 30 percent of all revenue from in-app charges, amounting to tens of millions of dollars to date.”

The agency said it received thousands of complaints from parents about in-app charges made by their kids without permission. The suit mentions a complaint from a family whose daughters incurred $358.42 in unauthorized charges.

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Amazon began billing for in-app charges in November 2011, and before long the complaints started mounting, the FTC said. Just weeks after Amazon began billing for in-app charges, consumer complaints about unauthorized charges by children on Amazon’s mobile devices reached levels an Amazon Appstore manager described as “near house on fire.”

Making the matter even more offensive, the FTC says many of the apps are games that appeal to children, and the apps encourage kids to buy various features or enhancements so they can quickly advance to additional levels.

In a letter sent to the FTC earlier this month, Amazon said that it employed "effective" parental controls and provided users with real-time notices each time an in-app purchase was made.

"We have continuously improved our experience since launch, but even at launch, when customers told us their kids had made purchases they didn't want we refunded those purchases," wrote Andrew DeVore, Amazon's associate general counsel. The letter was submitted after the FTC informed Amazon they would move forward with the lawsuit unless it made changes to its app store model, similar to Apple's past modifications.

In January, the FTC settled a similar case with Apple. Under the terms of the settlement, Apple is required to obtain “express, informed consent” before billing for any in-app charges. Apple may obtain consumers’ consent for future charges, but customers must have the option to withdraw at any time. Apple also refunded $32.5 million in in-app charges.

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