Amazon Must Refund For Children’s ‘Accidental’ In-App Purchases: FTC

Tempur Sealy TPXActivedia / Pixabay

The case that started in 2014 and brought Amazon under much criticism for failing to warn people, especially parents, about in-app purchases, has finally come to an end with a ruling against the e-commerce giant. On Tuesday, the Federal Trade Commission (FTC) ruled to end the lawsuit, meaning the refund process can start now.

Amazon and FTC finally reach an agreement

The FTC urged the e-commerce giant in 2014 to introduce stronger measures to prevent accidental or unauthorized charges through apps, like password protection. But at the time, the company did not accept the request, saying it had implemented sufficient controls and notifications. Then in 2016, a federal judge ruled that the company was not doing enough to inform people about accidental in-app purchases, making it liable to issue refunds. Finally, on Tuesday, the FTC reached an agreement with the e-commerce giant after a three-year long legal battle in which it accused the latter of billing consumers for unauthorized purchases made by children.

Thomas B. Pahl, acting director of the FTC’s Bureau of Consumer Protection, said the consumers who were affected by Amazon’s practices can now be compensated for the charges that they did not authorize or expect. The refund process for around $70 million in unauthorized purchases made between November 2011 and May 2016 will now start.

“This case demonstrates what should be a bedrock principal for all companies — you must get customers’ consent before you charge them,” Pahl said, in a statement.

Unauthorized in-app purchases are a big issue for tech firms

Amazon has yet to provide details about the refund program, like how the consumers affected by the accidental in-app purchases will be able to reclaim money owed to them. All these important details related to the refund program are expected to be announced at some point.

The ruling by the Federal Trade Commission is currently a U.S.-based ruling, but it could have implications for customers living in other parts of the world as well, like Europe and the U.K., notes The Verge. The Amazon App Store comes pre-installed on Amazon Fire tablets and can be added to Android devices as well.

All app platforms offer in-app purchases to users, but parents have often complained that Amazon’s service made it very easy for their children to make digital purchases without their consent. The retailer takes a 30% cut on all the apps sold through its digital store, according to the FTC.

It’s not just Amazon that has been hit by this kind of case. Both Google and Apple settled similar cases with the FTC in 2014. However, the combined refund of both amounted to only $51 million, less in comparison to Amazon’s $70 million. Apple emailed and sent postcards to all customers who might have been affected by the accidental purchases, according to Computer World. Ultimately, the iPhone maker received 37,000 claims, and it made refunds to all of them.

At 10 a.m. Eastern, Amazon shares were up 1.27% at $918.46. Year to date, the stock is up almost 23%, while in the last year, it is up almost 57%.

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About the Author

Aman Jain
Aman is MBA (Finance) with an experience on both Marketing and Finance side. He has worked as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, reviewing tech gadgets, playing PC games and cricket. - Email him at amanjain@valuewalk.com

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