Amazon Battles FTC Over Kids' In-App Purchases

Amazon and the Federal Trade Commission are battling in court about whether the agency should be allowed to continue with its lawsuit alleging that the online retailer unfairly charged parents for their children's in-app purchases.

Amazon says in court papers that the FTC is seeking to hold the company “to a new and unjustified” standard of unfair billing. “The requirements that the FTC seeks to impose through this lawsuit for in-app purchases are unmoored from any ... congressional mandate and unchecked by any lawful rulemaking process,” Amazon argues in a motion to dismiss the FTC's lawsuit.

But the FTC counters in papers filed this week that its allegations center on well-known principles banning companies from charging consumers without their consent. “Billing for unauthorized charges is an unfair practice,” the FTC says in its complaint. The agency adds that its complaint alleges the factors that establish unfair billing -- including that consumers lost money, and weren't able to avoid doing so.



The legal disputes dates to July, when the FTC sued Amazon in federal court for allegedly allowing children to make in-app purchases without their parents' consent. When Amazon initially launched its app store, in November 2011, the company allowed children to make purchases without entering a password, according to the FTC. Amazon later began requiring passwords, but only for charges of more than $20, the FTC alleges.

The FTC says these practices resulted in bills to parents for unauthorized in-app purchases by their children. The agency is seeking a court order requiring Amazon to reimburse parents for any charges that were incurred without their consent.

Earlier this year, Apple and Google agreed to provide refunds to parents in order to settle similar allegations by the FTC.

Amazon, which refused to settle out of court, argues that there was nothing wrong with its one-click purchase procedure for apps. “The Commission contends that Amazon violated Section 5 because it did not override Amazon’s famous 1-Click purchasing method and obtain 'express informed consent' from the parent each time a user who might be a child subsequently made an in-app purchase on the parent’s mobile device,” the company argues in its legal papers. “The Commission may not impose that new standard in this action,” Amazon adds.

Amazon also argues that it informed users about its one-click purchasing feature, and told parents that they would be responsible for in-app charges made by children. The company adds that enabled parents to block in-app purchases, among other controls.

“Moreover,” Amazon adds, “parents have always had the option to avoid any injury from a purchase they regret simply by seeking a refund from Amazon through Amazon’s customer service.”

The FTC said in its original complaint that parents faced “hurdles” to obtaining refunds. “Amazon’s process is unclear and confusing, involving emails and web pages that do not explain how to seek a refund for in-app charges, or that suggest that consumers cannot obtain a refund for such charges,” the FTC alleged.


The matter is pending before U.S. District Court Judge John Coughenour in Seattle.

"Kids with Smartphones" photo from Shutterstock.

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