Amazon.com has billed parents and other account holders for millions of dollars in unauthorised in-app charges incurred by children, according to a Federal Trade Commission complaint filed on 10 July in federal court. The FTC's lawsuit seeks a court order requiring refunds to consumers for the unauthorised charges and permanently banning the company from billing parents and other account holders for in-app charges without their consent. According to the complaint, Amazon keeps 30 percent of all in-app charges.
Amazon offers many children's apps in its appstore for download to mobile devices such as the Kindle Fire. In its complaint, the FTC alleges that Amazon violated the FTC Act by billing parents and other Amazon account holders for charges incurred by their children without the permission of the parent or other account holder. Amazon's setup allows children playing these kids' games to spend unlimited amounts of money to pay for virtual items within the apps such as "coins," "stars," and "acorns" without parental involvement.
The complaint alleges that when Amazon introduced in-app charges to the Amazon Appstore in November 2011, there were no password requirements of any kind on in-app charges, including the kids' games and other apps that appeal to children. According to the complaint, this left parents to foot the bill for charges they did not authorise.
According to the complaint, kids' games often encourage children to acquire virtual items in ways that blur the lines between what costs virtual currency and what costs real money. In the app "Ice Age Village," for example, the complaint noted that children can use "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 largest quantity purchase available in the app would cost USD 99.99.
The complaint highlights internal communications among Amazon employees as early as December 2011 that said allowing unlimited in-app charges without any passwords was "...clearly causing problems for a large percentage of our customers," adding that the situation was a "near house on fire."
In March 2012, according to the complaint, Amazon updated its in-app charge system to require an account owner to enter a password only for individual in-app charges over USD 20. As the complaint notes, Amazon continued to allow children to make an unlimited number of individual purchases of less than USD 20 without a parent's approval. An Amazon employee noted at the time of the charge that "it's much easier to get upset about Amazon letting your child purchase a USD 99 product without any password protection than a USD 20 product," according to the complaint. In July 2012, as set forth in the complaint, internal emails again described consumer complaints about in-app charges as a "house on fire" situation.
The complaint alleges that in early 2013, Amazon updated its in-app charge process to require password entry for some charges in a way that functioned differently in different contexts. According to the complaint, even when a parent was promoted for a password to authorise a single in-app charge made by a child, that single authorisation often opened an undisclosed window of fifteen minutes to an hour during which the child could then make unlimited charges without further authorisation. Not until June 2014, roughly two and a half years after the problem first surfaced and only shortly before the Commission voted to approve the lawsuit against Amazon, did Amazon charge its in-app charge framework to obtain account holders' informed consent for in-app charges on its newer mobile devices, as explained in the complaint.
According to the complaint, thousands of parents complained to Amazon about in-app charges their children incurred without their authorisation, amounting to millions of dollars of charges. For example, one mother noted in the FTC complaint told Amazon her daughter was able to rack up USD 358.42 in unauthorised charges, while others complained that even children who could not read were able to "click a lot of buttons a random" and incur several unauthorised charges.
The company's stated policy is that all in-app charges are final and nonrefundable. According to the complaint, even parents who have sought an exception to that 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 those charges.
The Commission vote authorising staff to file the complaint was 4-1, with Commissioner Joshua D. Wright voting no. The complaint was filed in the US District Court for the Western District of Washington.
