FTC files Suit Against Amazon Over Kids Apps

Amazon says policy was legal and suit makes no sense
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The Federal Trade Commission Thursday (July 10) filed suit against Amazon.com, alleging it had billed parents and others million of dollars for unauthorized in-app charges made by children.

The FTC wants the court to force Amazon to provide refunds and impose a permanent ban on billing parents and other account holders without their consent.

The FTC claims that Amazon allowed kids to spend unlimited amounts of money on virtual items without any parental involvement.

“Even Amazon's own employees recognized the serious problem its process created," said FTC Chairwoman Edith Ramirez in announcing the suit. "We are seeking refunds for affected parents and a court order to ensure that Amazon gets parents' consent for in-app purchases."

The complaint "alleges that when Amazon introduced in-app charges to the Amazon App store in November 2011, there were no password requirements of any kind on in-app charges, including in kids’ games and other apps that appeal to children. According to the complaint, this left parents to foot the bill for charges they didn’t authorize."

The FTC said thousands of parents had complained to Amazon, but that its policy was that all such sales were final. The vote was 4-1, with Commissioner Joshua Wright dissenting.

Apples settled an FTC complaint over children's in-app charges with Apple earlier this year.

In a letter to FTC Chairman Edith Ramirez earlier this week following a series of meetings on the issue and FTC staffer's signaled the suit was coming, Amazon said it was deeply disappointed in the commission's move.

Amazon said that from the outset, its in-app charges were "customer-focused, and lawful, including prominent notice of in-app purchasing, effective parental controls, real-time notice of every in-app purchase, and world-class customer service."

Amazon said it was "completely aligned" witt the FTC's consumer-focused goals, and said filing suit against a company "whose practices were lawful from the outset and that already meet or exceed the requirements of the Apple consent order makes not sense and is an unfortunate misallocation of the commission's resources."

"The FTC should be encouraging innovation in the growing mobile industry, which benefits consumers and competition," said Peggy Hudson, SVP of government affairs for data marketing association DMA. "Instead, the Commission seems focused on using novel legal theories and scarce enforcement resources to go after America's leading tech companies in court.  Amazon reportedly has already done the right thing by enhancing its app market and providing consumer refunds, so consumers have nothing to gain and plenty to lose from the Commission's lawsuit.  Nothing will discourage future innovation faster than punishing good deeds."

"As always, the FTC can and should investigate the business practices of a company if it discovers legitimate consumer harms," said Daniel Castro, senior analyst with the Information Technology and Innovation Foundation, in advance of the anticipated suit. "What the FTC should not do is punish good actors for violating non-existent rules. In cases like Amazon’s where the company is adapting to consumer needs and has caused little to no real consumer harm, the FTC should not supplant a company’s judgment on how best to serve its customers with its own."

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