Amazon Sued, Billed Parents Millions For Unauthorized In-App Purchases Made By Children, FTC Says

Children are becoming increasingly tech-savvy, with that comes concerns over exactly how far a business must go to ensure all virtual payments are being authorized by the account holder. In the case of Amazon, the Federal Trade Commission claims that Amazon did not do enough to ensure that in-app purchases made by children were authorized by the parent.

In fact, according to the complaint released by the FTC against Amazon, the app store manager said the issue was so bad it was being portrayed by upset customers as near “house on fire” importance. The complaint is outlined as follows:

“Amazon offers thousands of apps through its mobile app store, including games that children are likely to play. In many instances, after installation, children can obtain virtual items within a game, many of which cost real money. Amazon bills charges for items that cost money within the app — ‘in-app charges’ — to the parent. Amazon began billing for in-app charges in November 2011, well after media reports about children incurring unauthorized charges in similar apps from other mobile app stores. Amazon nonetheless often has failed to obtain parents’ or other account holders’ informed consent to in-app charges incurred by children. 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’ In total, parents and other Amazon account holders have suffered significant monetary injury, with thousands of consumers complaining about unauthorized in-app charges by their children, and many consumers reporting up to hundreds of dollars in such charges. “

Amazon has good reason to allow ease of billing for in-app charges: the company makes a whopping 30 percent on all these purchases. The FTC highlights that the issue of consent is of utmost importance in this case. A parent may authorize the downloading of the app for the child to play, but remains unaware of all the charges that may be racked up within the game itself.

PC World reports Jessica Rich, director of the FTC’s Consumer Protection Bureau, said during a press conference regarding the Amazon complaint that Amazon employees raised concerns about in-app purchases by children years before the company changed its procedures. Amazon customers seeking refunds found a process “unclear and rife with deterrents,” she said. Amazon’s official policy on in-app purchases said it does not give refunds. In the process, Amazon has earned millions off of these unauthorized purchases.

The FTC remains firm on their feelings that the in-app purchases made available on children’s games goes against the FTC Act, prohibiting unfair and deceptive business practices. The agency feels it is unfair that Amazon’s app store allowed children playing games to spend “unlimited amounts” of money to pay for virtual items without parental involvement. In addition to the “unlimited” spending, when Amazon introduced in-app charges to the Amazon app store in November 2011, there were no password requirements of any kind. The deceptive practice comes from the fact that many kids’ games encouraged children to acquire virtual items in ways that blur the lines between spending virtual currency and real money, the agency said.

In one app that PC World points out, Ice Age Village, children can use virtual coins and acorns to buy items in the game without a real-money charge. However, they can also purchase additional coins and acorns using real money on a screen that is visually similar to the one that has no real-money charge, the FTC said. A one-time purchase in the app could cost as much as $99.99.

What do you think about the FTC crackdown on unauthorized in-app purchases made by children? Is it Amazon’s responsibility to ensure the charges are being made by the account holder, or is it the parent’s responsibility to ensure the child know what they can and cannot purchase? Are you a parent that has been victim to the dreaded in-app purchases made by children?

[Image Credit: Newsela]