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FTC Sues Amazon Over Kids' In-App Purchases

Amazon says it has already changed its practices.

Robert Mandel/Shutterstock

The Federal Trade Commission sued Amazon Thursday, charging that the company made it too easy for children to make unauthorized purchases on mobile devices.

The FTC complaint alleges that children were able to easily buy apps or make in-app purchases for virtual products like coins or extra lives in games on the Kindle Fire and other devices without parental permission. Amazon also didn’t make it easy for parents to get the charges reversed, the agency said.

“Amazon’s in-app system allowed children to incur unlimited charges on their parents’ accounts without permission,” said FTC Chairwoman Edith Ramirez in a statement. “Even Amazon’s own employees recognized the serious problem its process created. We are seeking refunds for affected parents and a court order to ensure that Amazon gets parents’ consent for in-app purchases.”

An Amazon spokeswoman did not offer comment on the suit, but pointed to a July letter the company sent to the FTC defending its practices (embedded below).

“No one is more focused on creating a great experience for customers than Amazon and in that respect we are completely aligned with the Commission’s goals,” Amazon wrote. “Pursuing litigation against a company whose practices were lawful from the outset and that already meet or exceed the requirements of the Apple consent order makes no sense and is an unfortunate misallocation of the Commission’s resources.”

The company has said previously that it didn’t agree with the FTC’s charges because it had already changed its practices to require passwords to complete purchases. The company also says it refunds unauthorized charges made by children.

FTC officials disagree, saying that while Amazon updated its policies in March 2012 to require a password to complete purchases of $20 or more, children were still able to make an unlimited number of in-app purchases for lower dollar amounts. It wasn’t until last month — shortly before the FTC voted to move ahead with its lawsuit — that the company changed its policies to require parental consent for in-app charges on some devices, the agency contends.

FTC officials also said Amazon’s refund policy is confusing and doesn’t make it easy for consumers to seek reimbursement for their children’s purchases.

Amazon’s decision to challenge the FTC’s complaint puts it at odds with competitor Apple, which faced similar complaints from angry parents.

Apple reluctantly settled with the FTC earlier this year, agreeing to a consent decree that required it to provide full refunds to customers and change its billing practices to require consumers to give explicit consent before making in-app purchases.

FTC officials began looking into the issue at both companies after complaints about the charges began in 2011, but by the time the agency had readied its suit, Apple had already changed its policies. Apple CEO Tim Cook told employees at the time that the company didn’t agree with the complaint but agreed to settle anyway because it was the easiest path forward.

“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,” Cook told employees in an email.

FTC officials declined to offer any insight into whether Google might be the FTC’s next target. As Politico noted yesterday, FTC officials received an email from an Apple attorney in January pointing out that Google’s app store also allows the same sort of unauthorized purchases.

Asked about Google during a call with reporters, FTC Consumer Protection Director Jessica Rich responded that she “can’t comment on Google at this time.”

Amazon’s Letter to the FTC

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