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FTC, Amazon Call Truce Over In-App Purchase Lawsuit
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Pet Shop Story Amazon

Summary: The Federal Trade Commission and Amazon have dropped the appeals in the case, leaving Amazon with $70 million in refunds to be given out to consumers for unauthorized purchases.

The Federal Trade Commission and Amazon have agreed to drop all appeals in a case against Amazon regarding in-app purchases. Amazon will be taking a hit of up to $70 million for the in-app purchases that the FTC claims were received without parental consent. Similar challenges were filed in previous years against Apple and Google for failing to get parental consent for purchases made by children.


What does this mean? If you have a kid that racked up a big bill with in-app purchases on select Amazon devices, you may be able to get a refund for those purchases. The FTC first filed suit against Amazon in 2014 for allowing in-app purchases made by kids on apps downloaded from the Amazon app store that did not receive parental consent. The FTC explained, “More than $70 million in in-app charges made between November 2011 and May 2016 may be eligible for refunds. Details on the refund program, which Amazon will operate, will be announced shortly.”

The FTC claims that apps like the games “Pet Shop Story” and “Ice Age Village” were too easy for children to run up bills on mobile phones. They estimate that Amazon made $86 million in unauthorized charges.

Federal courts ruled in favor of the FTC. In April 2016, a federal judge ruled that Amazon billed consumers for the purchases kids made in mobile apps designed for kids. The FTC and the court found that Amazon did not receive permission from the parents for the charges. The FTC sought an injunction, which the courts did not grant, against Amazon conducting similar actions in the future. The FTC was appealing that ruling while Amazon was appealing the original ruling.

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Acting director of the FTC’s Bureau of Consumer Protection, Thomas B. Pahl, said, “This case demonstrates what should be a bedrock principle for all companies – you must get customers’ consent before you charge them. Consumers affected by Amazon’s practices can now be compensated for charges they didn’t expect or authorize.”

In the cases against Apple and Google, the FTC was able to reach settlements on the basis that a lack of password protection allowed minors to make purchases without parental authorization. Apple agreed to refund $32.5 million while Google settled on $19 million. All three companies have undoubtedly made quick improvements to password and other controls to prevent such a punishment being slapped on them again.

Amazon had argued that the in-app charges were “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.”

With the two organizations agreeing to stop the appeals, the refund process will begin. Amazon has stated that the process will begin shortly. They had hoped to use gift cards but a U.S. district judge rejected the request in November. Amazon is required to refund consumers directly to their debit or credit card or by paper check, gift cards are not an acceptable form of refund. Amazon will set up a notice-and-claims process, alerting parents if they are eligible for a refund.

Do you think parents have some responsibility for letting their children play with mobile phone games without supervision? Tell us in the comments below.

To learn more about other legal battles regarding Amazon, read these articles:




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