Apple Refunds $32.5 million for Kids Mobile Game Purchases

Facing a lawsuit from the Federal Trade Commission, Apple has agreed to a settlement with the FTC where Apple refunds $32.5 million for kids mobile game purchases. The total amount of the refund is $32.5 million.

9 to 5 Mac obtained an internal email from Apple CEO Tim Cook which shares the end results of Apple’s negotiations with the FTC over the complaints from consumers whose children were making purchases without their consent. Mr. Cook insisted in the email that the FTC consent was nothing that Apple was not planning to do anyway:

It doesn’t feel right for the FTC to sue over a case that had already been settled. To us, it smacked of double jeopardy. However, the consent decree the FTC proposed does not require us to do anything we weren’t already going to do, so we decided to accept it rather than take on a long and distracting legal fight.

In-app purchases have been around since 2009 and have since contributed to some of the most lucrative forms of gaming on the mobile market. The “Free-to-play” or “Freemium” game market arose from this financial structure and many games are built around a premise that in order to experience the full game, in-app purchases must be made in order to allow for more content.

Electronic Arts is one publisher who found a $100 million revenue generator in the popular The Simpsons: Tapped Out which is now on iOS and Android phones and tablets. In the case of The Simpsons, the game is free to purchase but in order to get the premium characters, buildings or just speed up the time spent waiting for characters to finish their “quests”, real money must be spent.

The current way in-app purchases are protected is by a 15 minute time lock on iOS devices which require the user to input their Apple password every 15 minutes. During those 15 minutes purchases can be made without inputting the password again. For users, or parents, who wish to block all in-app purchasing the option to turn off in-app purchases is available in the system settings and has been since iOS4 launched in 2009.

However this did not stop stories of parents whose children who racked up credit card bills into the thousands. One of the more famous cases was when The Telegraph reported a case where Apple refunded parents of an 8-year-old who built up a $6,131 tab over 4 months. In this case, the daughter figured out her father’s password and used it to make the purchases which the father ignored.

Apple has received over 37,000 claims which Tim Cook stated that all will be refunded either by email or postcards if the email containing the refund bounced. This is isn’t the first lawsuit brought against Apple as we have reported before, however the FTC decided to get involved as well.

The FTC received complaints from parents who stated that the in-app purchase model in place was too easy for minors to exploit despite the safeguards Apple had in place. According to the FTC, tens of thousands of complaints were filed against Apple looking for action on a federal level for Apple’s unfair billing practices.

As a result of the settlement, Apple is refunding parents $32.5 million to consumers as well as change its billing practices by increasing the amount of information to consumers so they can make an informed decision before purchasing anything in-app. How this will manifest itself is yet to be announced by either Apple or the FTC.