FTC Sues Amazon for Knowingly Allowing Children to Incur App Charges without Parental Approval

The Federal Trade Commission filed suit against Amazon in the U.S. District Court for the Western District of Washington, ask the court to order refunds of "millions of dollars in unauthorized in-app charges incurred by children" through apps in the Amazon appstore and on devices such as the Kindle Fire.

FTC Chairwoman Edith Ramirez said in annoucing the suit, "Amazon's in-app system allowed children to incur unlimited charges on their parents' accounts without permission. 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."

The commission alleges that Amazon knew about the problem within a month after launch in-app charges in November 2011 and intentionally allowed the problem to persist in various forms until June 2014. As early as December 2011, employees at the famously-customer-centric retailer communicated to each other that allow in-app purchases without requiring a password (and therefore adult approval) was "…clearly causing problems for a large percentage of our customers."

By March 2012 they added a password requirement, but only for charges over $20. Once again, the FTC cites an employee's email that noted "it's much easier to get upset about Amazon letting your child purchase a $99 product without any password protection than a $20 product." The filing promises to air additional details on plainly non-consumer friendly practices at Amazon. The complaint says that "even parents who have sought an exception to [the no refunds on app purchases] policy have faced a refund process that is unclear and confusing, involving statements that do not explain how to seek refunds for in-app charges or suggest consumers cannot get a refund for these charges." They also say that "thousands of parents complained to Amazon about in-app charges their children incurred without their authorization, amounting to millions of dollars of charges. For example, one mother noted in the FTC complaint told Amazon that her daughter was able to rack up $358.42 in unauthorized charges, while others complained that even children who could not read were able to 'click a lot of buttons at random' and incur several unauthorized charges."

That sounds a lot worse that knowingly adjusting the list price of an ebook by a few dollars. The FTC says it is "seeking full refunds for all affected consumers, disgorgement of Amazon's ill-gotten gains, and a court order ensuring that in the future Amazon obtains permission before imposing charges for in-app purchases." The FTC settled a similar complaint with Apple earlier in the year.

Amazon declined to settle with the FTC earlier in July and said in a letter to the commission, "When customers told us their kids had made purchases they didn't want, we refunded those purchases." The FTC says that only in June 2014 "did Amazon change its in-app charge framework to obtain account holders’ informed consent for in-app charges on its newer mobile devices."