In-app purchases include extra turns, additional game levels, new game characters and other items that players can purchase for amounts that generally range from $1 to $5 dollars but can cost quite a bit more for rarer items. Programs like Viber also allow for paid stickers and other items to customize their experience, app store owners as a rule hold on to about 30% of the revenues from these purchases and can be quite lucrative.
Apple’s settlement with the FTC
In January, Apple Inc. (NASDAQ:AAPL) settled with the FTC for $32.5 after the commission levied charges against Apple alleging that the company hadn’t done enough to prevent from purchasing virtual goods without parental consent. As the App Store stores credit card numbers, it was easy for children to make unauthorized purchases. The money that Apple paid was distributed to the parents who complained about their children’s in-app purchases.
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“The commission is focused on ensuring that companies comply with the fundamental principle that consumers should not be made to pay for something they did not authorize,” an FTC spokesman said after the settlement. “Consumers using mobile devices have the same long-established and fundamental consumer protections as they would anywhere else.”
Amazon pushes back
Unlike Apple, Amazon.com, Inc. (NASDAQ:AMZN) is pushing back at the FTC saying that it is ready to “defend our approach in court,” rather than paying out a settlement or taking on additional record keeping expenses according to a report by the Wall Street Journal.
“When customers told us their kids had made purchases they didn’t want, we refunded those purchases,” said Andrew DeVore, an Amazon associate general counsel, in the letter to the FTC. He said Amazon’s app store included “prominent notice of in-app purchasing, effective parental controls and real-time notice of every in-app purchase.”
The FTC has stated that Amazon needs to require passwords for all purchases while making the refund process easier for consumers. The commission also maintains that is was only last month that Amazon began requiring informed consent for all purchases on all its devices that use its App Store and in that time Amazon has announced its first smartphone which should drive more traffic to the store.
The FTC maintains that it has seen thousands of complaints about in-app purchases on Amazon devices and some of those purchases are in the hundreds of dollar range especially from children using the company’s line of Fire Tablets.