Apple has agreed to pay out a minimum of $32.5 million to users of its devices, to settle a complaint from the Federal Trade Commission (FTC) involving in-app purchases made by children.
The FTC's complaint said that Apple violated the FTC Act by failing to make clear to parents that by entering a password (their Apple ID) they were not only approving a single in-app purchase but opening up a 15-minute window during which purchases could be made without re-entering the password, and so without the parents' direct consent.
In-app charges generally range from $0.99 to $99.99, said the FTC.
"In its complaint, the FTC notes that Apple received at least tens of thousands of complaints about unauthorized in-app purchases by children," the FTC said in a Jan. 15 statement.
"One consumer reported that her daughter had spent $2,600 in the app 'Tap Pet Hotel,' and other consumers reported unauthorized purchases by children totaling more than $500 in the apps 'Dragon Story' and 'Tiny Zoo Friends.'"
FTC Chairwoman Edith Ramirez and Commissioner Julie Brill, in a joint statement on the matter, emphasized that they didn't find fault with Apple's use of the 15-minute purchase window.
"Rather," they wrote, "our charge is that, even after receiving at least tens of thousands of complaints about unauthorized charges relating to in-app purchases by kids, Apple continued to fail to disclose to parents and other Apple account holders that entry of a password in a children's app meant they were approving a single in-app charge plus 15 minutes of further, unlimited charges."
Ramirez, in a second statement, called the settlement a victory for consumers and a signal to the business community.
"Whether you're doing business in the mobile arena or the mall down the street, fundamental consumer protections apply," said Ramirez. "You cannot charge consumers for purchases they did not authorize."
The Commission voted 3-1 to accept Apple's settlement, with Commissioner Joshua Wright voting no.
"This is a case involving a miniscule percentage of consumers—the parents of children who made purchases ostensibly without their authorization or knowledge," Wright wrote in his dissenting statement.
"There is no disagreement that the overwhelming majority of consumers use the very same mechanism to make purchases and that those charges are properly authorized," Wright continued. "… The Commission, under the rubric of 'unfair acts and practices,' substitutes its own judgment for a private firm's decisions as to how to design its product to satisfy as many users as possible, and requires a company to revamp an otherwise indisputably legitimate business practice."
Under the terms of the settlement, Apple will have to alert all consumers who were billed for in-app charges to the availability of refunds for those who were inappropriately charged, and issue the refunds promptly. If within 12 months Apple has issued out less than $32.5 million, the remainder will go to the Commission.
Apple didn't respond to a request for comment.