FTC Sues Amazon Over In-App Spending

Kate Patrick Contributor
Font Size:

The Federal Trade Commission filed a lawsuit against Amazon, Inc. Thursday over unauthorized in-app spending, claiming Amazon is breaking one of the basic principles of consumer protection.

The suit comes a week after suing T-Mobile on similar charges and six months after suing Apple. (RELATED: Apple Points The Finger On In-App Spending)

In a statement to the press, FTC’s director of consumer protection Jessica Rich claimed there is no difference between purchases made from a brick-and-mortar business and purchases made from an app store.

“Like the action we brought against T-Mobile last week, this case highlights a central tenet of consumer protection: companies need to get consumers’ consent before placing charges on their bills,” Rich said. “This principle applies to companies of all types, from brick-and-mortar businesses to mobile app stores. It applies to charges of all kinds, from purchases of physical goods to charges for the virtual items at issue in today’s action.”

Since 2011, the FTC has been investigating consumer complaints against mobile app stores about in-app spending. Parents demanded refunds when their children bought items within apps, racking up thousands of dollars in charges.

With Amazon, parents could enter a password to confirm a purchase within an app, but this would unlock 15-30 minute windows where children could make additional purchases without parental consent.

Because parents were uninformed of these additional charges, the FTC accuses Amazon of “illegal conduct.”

“For two-and-a-half years, from the very beginning when they started seeking in-app charges from kids and parents, Amazon did not obtain informed consent for these charges,” Rich said.

Even though Amazon has already refunded thousands of costumers, Rich believes thousands more fell through the cracks.

“The refund process Amazon said that it has is not adequate, Amazon had an official no refund policy,” Rich said. “Even if a tenacious consumer still pursued their refund there were many obstacles in their way. It is very likely that many consumers did not get their refund.”

With litigation, Rich hopes to settle the complaints and promote consumer protection.

“There are thousands of complaints that we know of, and there may be more when we proceed to litigation,” Rich said.

CEI’s Director of Technology Studies Ryan Radia said the FTC may be conducting an unfair survey of Amazon’s motives, and suggests that Amazon’s app features were designed only to improve the consumer’s experience.

“The FTC has not shown that Amazon’s behavior rose to the level of an unfair practice,” Radia wrote in an email to The Daily Caller. “Although the FTC cites several remarks made by Amazon employees about complaints regarding purchases by kids, the FTC omits any mention of why Amazon might have elected against making in-app purchases more complicated. Perhaps the vast majority of users enjoyed the ease of such purchases, without a password entry requirement. The FTC treats this tradeoff as it if doesn’t exist.”

The FTC knows Google bills unauthorized in-app charges, so Google may be the FTC’s next target.

“Like many companies in the mobile marketplace, Amazon struggled with tough interface design choices about which there are no clear ‘right’ and ‘wrong’ answers,” Radia told theDC. “Striking the right balance when it comes to usability should be left to the marketplace, not to the FTC or other federal regulators.”

When asked about potential investigations of Google, the FTC declined to comment.

Follow Kate on Twitter