Apple has agreed to provide refunds of at least $32.5 million to settle charges that it unfairly billed parents for their children's in-app purchases, the Federal Trade Commission announced on Wednesday.
The FTC charges center on allegations that Apple didn't obtain parents' consent to the purchases before billing them. Although Apple's iTunes store requests that an account holder enter a password before making an initial in-app purchase, the company often saves that password for at least 15 minutes -- during which time children can continue to rack up charges, according to the FTC's complaint.
“In many instances, Apple does not obtain an account holder’s informed consent before billing for in-app charges by children,” the FTC says in its complaint. The agency adds that Apple doesn't make clear that entering a password “triggers a window, during which users can incur unlimited charges without further action by the account holder.”
The FTC says that many of the charges were incurred in gaming apps aimed at young children. “These games invite children to obtain virtual items in contexts that blur the line between what costs virtual currency and what costs real money,” the FTC alleges.
One app highlighted by the FTC, “Dragon Story,” requires that children use virtual gold, coins and food to play. “The game sometimes informs children that they are “low on food!” and that a dragon is “hungry,” and provides a link to a screen titled Stock Up!," the FTC alleges. The agency adds that the app sells “gold” for as much as $99.99.
In addition to offering refunds, Apple said it would revise its billing practices. Going forward, the company will require that people explicitly authorize charges for in-app purchases.
Two FTC members, Chairwoman Edith Ramirez and Commissioner Julie Brill, said in a statement that the enforcement action “reaffirms that companies may not charge consumers for purchases that are unauthorized -- a principle that applies regardless of whether consumers are in a retail store, on a Web site accessed from a desktop computer, or in a digital store using a mobile device.”
Commissioner Joshua Wright dissented from the FTC's decision. “The Commission, under the rubric of 'unfair acts and practices,' substitutes its own judgment for a private firm’s decisions as to how to design its product to satisfy as many users as possible, and requires a company to revamp an otherwise indisputably legitimate business practice,” he said in a dissenting statement.
Advocacy group Center for Digital Democracy praised the FTC's move, but urged the agency to go further by investigating the marketing of in-app purchases to children. “In-app purchasing is becoming the dominant business model in many online games and other children’s entertainment content on mobile phones, tablets and gaming devices. Yet the techniques used to trigger these purchases are, in many cases, unfair and deceptive, taking advantage of children’s vulnerabilities,” executive director Jeff Chester stated. “The agency should conduct a broad investigation of emerging techniques that target children on mobile, gaming and other platforms, and identify a set of industry-wide fair marketing guidelines.”
Last year, Apple agreed to settle a class-action lawsuit about in-app purchases by children. That
deal calls for the company to provide iTunes credits and refunds to parents whose children rang up charges by purchasing virtual currency for the games they had downloaded.
"Girl with Tablet" photo from Shutterstock.