In January, Apple agreed to refund consumers $32.5 million to settle an FTC complaint that it charged parents for their kids’ in-app purchases without adult consent.
The FTC action says that “Amazon.com, Inc. has billed parents and other account holders for millions of dollars in unauthorized in-app charges incurred by children.” It seeks to recover millions of dollars in refunds to consumers for these alleged unauthorized charges.
The FTC complaint says that children were permitted to incur charges, especially in games, without any parental involvement. This is based on the contention, going back to 2011, that Amazon required no passwords or other authorizations by parents before their kids could ring up charges.
Amazon modified the policy in 2012 “to require an account owner to enter a password only for individual in-app charges over $20.” But kids could continue to incur charges under the $20 threshold without parental approval.
Internal Amazon memos reportedly describe numerous consumer complaints and characterize the situation as a “house on fire.” However Amazon’s official policy toward in-app purchases was that they were “final and nonrefundable.”
In-app purchases is far-and-away the dominant app revenue model according to data from App Annie. Indeed nearly 90 Percent of Google Play app revenues are derived from so-called “freemium” games according to another App Annie report.
Currently Italian regulators are investigating whether freemium games (and in-app purchasing) mislead consumers. It’s unlikely that Amazon will be vindicated in court; it’s more likely the company will disgorge an Apple-like multimillion-dollar settlement.