Amazon Sued By FTC Over Unauthorized In-App Purchases

We have previously reported on Apple’s legal troubles over its mobile operating systems allegedly allowing unauthorized in-app purchases by minors.  Now Amazon.com is facing similar legal problems stemming from charges incurred by minors while using “apps” and playing games.  The interesting catch in the case of Amazon is the the suit was not brought by angry parents but by the Federal Trade Commission. In its lawsuit (which it brought in federal court in Washington), the FTC alleges that Amazon unlawfully billed parents for the children’s in-app purchases worth millions of dollars.  These unlawful billings allegedly occurred because the set-up on Amazon’s mobile devices allowed game playing children to spend unlimited amounts of money to pay for virtual items within the apps such as “coins” or “stars.”  Initially, no password was required in order for the children to make in-app purchases.  In early 2012, Amazon updated its system to require an account owner – presumably, an adult – to enter a password only for individual in-app charges. However, a password was only required for charges over $20.  Amazon updated its system once again in early 2013 to require a password for all such purchases. However, Amazon allegedly failed to disclose that such an authorization could open a window of up to 60 minutes during which unlimited charges could be occur without further authorization. The FTC’s lawsuit is brought under the FTC Act.  Section 5(a) of the FTC Act, 15 U.S.C. § 45, prohibits “unfair or deceptive acts or practices in or affecting commerce.”  According to the FTC’s complaint:

In numerous instances, Defendant has billed parents and other Amazon account holders for children’s activities in apps that are likely to be used by children without having obtained the account holders’ express informed consent. [This] constitute[s] unfair acts or practices in violation of Section 5 of the FTC Act, 15 U.S.C. § 45(a) and (n).

Regardless of the outcome of the lawsuit, this litigation risks a big PR hit for Amazon, a corporation which has always a prided itself on a “customer comes first” culture.  However, the allegations contained in this lawsuit doesn’t paint the company in the best light. We wonder at this point how the publicity may affect Amazon’s litigation strategy.  The complaint alleges that the Appstore manager described this situation as a “near house on fire” situation in 2011, yet it didn’t fully require parental consent for purchases until 2014.

The lawsuit is Federal Trade Commission v. Amazon.Com, Inc., No. 2:14-CV-01038 (W.D. Wash.).

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