Amazon will shell out $70 million to users whose children made unauthorized in-app purchases between 2011 and 2016.

Amazon Has to Pay Up to $70 Million Because It Let Kids Splurge on In-App Purchases Without Their Parents’ Permission

Amazon Has to Pay Up to $70 Million Because It Let Kids Splurge on In-App Purchases Without Their Parents’ Permission

Moneybox
A blog about business and economics.
May 31 2017 5:19 PM

Amazon Has to Pay Up to $70 Million Because It Let Kids Splurge on In-App Purchases Without Their Parents’ Permission

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If your child made in-app purchases playing Amazon mobile games without your permission, you could be eligible for a refund!

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After nearly three years of litigation, Amazon finally agreed to refund consumers an estimated $70 million on Tuesday—fees incurred after the users’ children made thousands of in-app purchases without their parents’ permission.

Amazon’s troubles began in 2011, when the company first pioneered its Kindle Fire OS technology for mobile and tablet devices like the Kindle. As Ars Technica warned at the time, parental controls weren’t the default setting, while in-app purchases—things like virtual currency, stars, and acorns in mobile games including Candy Crush Saga and Ice Age Village—were facilitated by the “one-click shopping” default. Although Amazon later updated its settings to mandate a password for in-app purchases of more than $20, a security update in 2013 meant that parental authorization for a single charge “often opened an undisclosed window of 15 minutes to an hour during which the child could then make unlimited charges without further authorization,” according to a complaint filed by the Federal Trade Commission.

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The FTC sued Amazon in 2014 for insufficiently protecting users’ bank accounts from overeager children, whose in-app purchases sometimes ran consumers as much as $99.99 at a time without requiring any form of parental authentication. One mother cited in the federal agency’s complaint claimed that Amazon’s lax security had enabled her daughter to make $358.42 of in-app purchases without her permission, according to the Chicago Tribune. The FTC alleged that the Seattle-based company retained 30 percent of in-app fees incurred by the splurging kids. (And lest you think only the feds care about consumers getting suckered by their children, Kanye West went on an infamous Twitter rampage railing against in-app purchases made by his daughter, North, in 2015.)

The case simmered on in court until April 2016, when Judge John C. Coughenour of the U.S. District Court in Seattle granted the FTC’s motion for summary judgment against Amazon. The judge’s order held Amazon responsible for the missing consumer safeguards that enabled the juvenile spendthrifts, concluding that “a reasonable consumer unaware of the possibility of in-app purchases would not assume she was authorizing unforeseen charges.” The long-running legal tussle finally ended early last month when the FTC and Amazon jointly agreed to withdraw appeals they’d lodged following Judge Coughenour’s ruling, TechCrunch reported at the time. The FTC had appealed a judge’s denial of an injunction that would have barred Amazon from engaging in similar behavior in the future, USA Today reported Wednesday, while Amazon had quibbled with the court’s finding that its lax security surrounding in-app purchases was illegal. “This case demonstrates what should be a bedrock principle for all companies—you must get customers’ consent before you charge them,” said the acting director of the FTC’s Bureau of Consumer Protection, Thomas Pahl, after the cessation of courtroom hostilities.

Amazon isn’t the first high-flying tech giant to find itself in the FTC’s crosshairs over unauthorized in-app purchases. Apple reached a $32.5 million settlement with the federal agency in 2014 after unwitting users incurred a spate of unwanted fees on mobile and tablet devices, USA Today recorded. In September of that same year, Google likewise agreed to change its billing practices and shell out a minimum of $19 million to consumers in response to user allegations of unauthorized mobile purchases by children and an FTC complaint.

Amazon’s payouts started landing in users’ bank accounts on Tuesday. “Refund requests can be completed entirely online,” according to the FTC, and cover in-app purchases made between November 2011 and May 2016. Affected users have a full year to file a request with the company.

*Correction, June 1, 2017: This post’s headline originally misstated that Amazon will pay $70 million to consumers. That is an estimate.