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FTC sues Amazon for billing parents for children’s unauthorized charges

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The Federal Trade Commission (FTC) today filed suit against online retailer Amazon.com. The agency claims that Amazon illegally billed parents for millions of dollars of in-app charges made by their children. The FTC is asking the court to require Amazon refund illegally collected money and ban Amazon from charging customers for unauthorized purchases. Parents who have sought refunds face significant hurtles, the suit alleges, as Amazon's stated policy is that all app purchases are final and non-refundable.

Amazon’s app store offers applications that may be downloaded to devices such as Kindle Fire. According to the FTC, Amazon allows children to make purchases without parental consent. Children may spend unlimited amounts of money on virtual items such as “coins” and “stars” sold within applications. Amazon does not require passwords to make purchases, thereby allowing minors to run up charges on a parent’s account without the parent’s consent. The FTC claims this is a violation of regulations that prohibit “unfair or deceptive acts or practices in or affecting commerce.”

“Amazon’s in-app system allowed children to incur unlimited charges on their parents’ accounts without permission. Even Amazon's own employees recognized the serious problem its process created. We are seeking refunds for affected parents and a court order to ensure that Amazon gets parents' consent for in-app purchases." — FTC Chairwoman Edith Ramirez.

The FTC claims that thousands of parents have complained. One mother said her daughter ran up nearly $360 in unauthorized charges. Other parents noted that even children that could not read were capable of hitting random buttons and incurring charges. Children’s games offered in the app store encourage users to spend money, often confusing the difference between virtual and real money.

Video games such as “Ice Age Village” and “Tap Zoo” have in-app virtual stores where players may purchase items. Many children thought they were spending virtual money and did not realize they were racking up dept on their parents’ credit cards. Internal Amazon emails show that the company was aware of the problem, the FTC alleges.

In 2012, Amazon did update its system to require a password from account owners for charges in excess of $20. However, children were still able to make unlimited purchases of less than $20. Amazon again updated the system to require a password for all purchases, but once an account holder entered a password, a window of 15 minutes to an hour was left open that allowed unauthorized charges.

Earlier this year, the FTC settled a similar complaint about in-app purchases with Apple. In January, Apple agreed to refund at least $32.5 million in charges incurred by children for mobile app purchases made without parental consent. The FTC complaint was filed in the U.S. District Court for the Western District of Washington.

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