FTC Files Complaint Against Amazon, Despite Policy Changes

The FTC says Amazon has been "unjustly enriched" by in-app charges. Amazon, saying it has been responsive and innovative, will defend itself in court.

Amazon in-app charges

The Federal Trade Commission (FTC) has filed a complaint against Amazon.com for its practices regarding in-app purchases in applications targeted at children.

The FTC filed a similar complaint against Apple last year (after which Apple suggested the FTC also take a look at Google's practices.) In January, Apple and the FTC reached an agreement, and in March, Apple began reimbursing customers the agreed amount of $32.5 million.

Andrew DeVore, Amazon general counsel and vice president, told the FTC in a July 1 letter that, given the "constructive meetings" he had with Chairwoman Edith Ramirez, and the steps Amazon has taken to address consumer complaints, he was deeply disappointed to learn that the FTC was still planning to file a complaint. Unlike Apple, DeVore said Amazon would defend itself in court.

"As we have made clear from the outset of your inquiry, our experience at launch was responsible, customer-focused, and lawful, including prominent notice of in-app purchasing, effective parental controls, real-time notice of every in-app purchase, and world-class customer service," Devore wrote.

"Constant iteration on behalf of customers has produced not only an in-app purchasing experience that already meets the requirements of the Apple consent order, but the development of industry-leading parental controls like Kindle Free Time," he continued. "We believe the commission should promote that kind of iteration on behalf of customers."

FTC Says Amazon Customers Still Injured

The FTC, in its complaint, explained that Amazon began billing for in-app charges in November 2011, "well after media reports about children incurring unauthorized charges in similar apps from other mobile app stores." Nonetheless, Amazon "failed to obtain parents' or other account holders' informed consent to in-app charges incurred by children."

An issue in the complaint against Apple was that while Apple makes the adult user of a device enter a password to approve purchases, the default in iOS was to leave open a 15-minute window after the initial sign-in. Many adults, not knowing this, would sign up to download a free app and then hand over the device to a child, as the FTC described in a January blog post titled, "How to Lose Hundreds in 15 Minutes."

In Amazon's case, there was no such window for misunderstanding.

"When a user engages in an activity associated with an in-app charge … Amazon displays a pop-up containing information about the virtual item and the amount of the charge (the 'Charge Popup')," wrote the FTC, explaining the early purchase-approval process. "A child, however, can clear the Charge Popup simply by pressing a button labeled 'Get Item.'

Amazon, which "retains 30 percent of all revenue from in-app charges," was aware that in-app charges within childrens' apps quickly became an issue.

"Just weeks after Amazon began billing for in-app charges, customer complaints about unauthorized charges by children on Amazon's mobile devices reached levels an Amazon manager described as 'near house on fire,'" wrote the FTC.

Around March 2012, Amazon began requiring password confirmation for in-charges exceeding $20. "It's much easier to get upset about Amazon letting your child purchase a $99 product without any password protection than a $20 product," the FTC quotes Amazon's Appstore manager as saying.

In early 2013, Amazon again adjusted its in-app charge framework to require a password for any in-app charge, though the change took effect at different times and in different ways for different apps and devices and account holders. In some instances, the amount being charged wasn't stated.

The FTC complaint concludes that, short of injunctive relief, Amazon will "continue to injure consumers, reap unjust enrichment and harm the public interest."

Amazon's DeVore called the complaint an "unfortunate misallocation of the commission's resources."

He added, "No one is more focused on creating a great experience for customers than Amazon, and in that respect, we are completely aligned with the commission's goals."

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