Blog Post

Amazon will battle the FTC over kids’ in-app purchases, rejecting a Google-style settlement

Amazon is doubling down in an unusual lawsuit with the federal government, which is suing the retail giant for allowing kids to make one-touch purchases from apps on the Kindle Fire device.

The lawsuit is unusual because Apple and Google have already settled with the Federal Trade Commissions over similar allegations, and agreed to pay $32 million and $19 million in refunds to parents, respectively. The FTC says all three companies conducted unfair trade practices by selling so-called “bait app” game that are typically free, but invite the player to purchase “acorns” or some other type of digital good.

In its complaints against [company]Amazon[/company], the FTC says “thousands” of parents complained after their kids ran up bills, sometimes worth hundreds of dollars, in app expenses on their Kindles. The lawsuit itself began this summer, and late last week Amazon filed a renewed dismissal request that suggests the government’s complaint is misguided and over-zealous:

Amazon and the Court are left with a mystery as to what additional barriers the FTC would require Amazon to implement for in-app purchases. That mystery makes the FTC’s request for an injunction particularly inappropriate. … But “express informed consent” has independent legal meaning inapplicable here, and that confusion permeates the Complaint. The FTC cannot concede away this fundamental flaw.

Amazon’s decision to get sued, rather than settle, amounts to a power struggle of sorts between the retailer and the agency that some call America’s “most powerful technology cop” — if Amazon prevails, it will be a vindication for the tech sector and an embarrassment for the FTC.

The retailer, which has recently updated its policies to make in-app purchases more difficult, also states that [company]Google[/company] and [company]Apple’s[/company] decision to a future code of conduct should have no bearing on what Amazon did in the past.

The company also stressed that it has given refunds to everyone who asked for them and, in a notable passage, declared that “The FTC Act does not exempt parents from the responsibility to supervise their children” — which echoes Amazon’s core argument that the app purchases were implicitly authorized by the parents.

Overall, though, the legal arguments are less interesting than Amazon’s strategic decision: why did it pick a fight with a powerful agency, when it could have simply settled for a fine that, for a company its size, would surely have been pocket change?

In response to a request for comment, Amazon simply referred me to what it stated in the legal proceedings. Here’s the latest filing with key parts underlined:

Amazon FTC Reply

[protected-iframe id=”72a5964f4f13fa14c0f9adcd2bc8f48d-14960843-34118173″ info=”https://www.scribd.com/embeds/242109525/content?start_page=1&view_mode=scroll&show_recommendations=true” width=”100%” height=”600″ frameborder=”0″ scrolling=”no”]

3 Responses to “Amazon will battle the FTC over kids’ in-app purchases, rejecting a Google-style settlement”

  1. Sick of some of today's so called parents

    So a parent gives their kid a Kindle, which has access to the parent’a Amazon account which can make in-app purchases. The child goes and buys things, and now the parents says its Amazon;s fault their child bought stuff on the parent’s account, which the parent’s gave them access to in the first place? Go Amazon! Parents need to take responsibility today

    • They (Google, Apple) didn’t have to pay, they chose to settle. Parents handing their children a device linked directly to their credit card and then giving them the password to use it means the parents are at fault. Its time for people to stop crying when they make a mistake and expect someone else to foot the bill. As an app developer with IAP’s this has done nothing but make 1 click refunds a streamlined process. We don’t offer predatory IAP’s and make it to enhance the game rather than required to play. Since this came out we see upwards of 80% refund rate. Everyone knows that if you buy something, just request a refund and you now get it for free.