FTC Sues Amazon for In-App Purchases

The US Federal Trade Commission sued Amazon.com on Thursday, alleging that the retailer allowed children to illegally make millions of dollars of purchases inside of apps sold through its Android-based online store. The complaint mirrors a lawsuit the FTC had previously launched against Apple, but if anything, Amazon's handling of this issue has been even more anti-consumer.

"Amazon.com has billed parents and other account holders for millions of dollars in unauthorized in-app charges incurred by children," a Federal Trade Commission statement reads. "The FTC's lawsuit seeks a court order requiring refunds to consumers for the unauthorized charges and permanently banning the company from billing parents and other account holders for in-app charges without their consent. According to the complaint, Amazon keeps 30 percent of all in-app charges."

The FTC previously tried to settle with Amazon, offering the company terms similar to those that Apple agreed to in its own settlement over in-app purchases: In that case, Apple agreed to refund at least $32.5 million in purchases that were made by children in its iOS app store. But Amazon has refused the offer, and has told the FTC it doesn't believe it's done anything wrong.

The FTC begs to differ.

According to the agency, even Amazon's own employees complained about the in-app purchasing issues with its platform. "As early as December 2011 internal communications among Amazon employees said allowing unlimited in-app charges without any password [as Amazon was amazingly doing at the time] was 'clearly causing problems for a large percentage of our customers,' adding that the situation was a 'near house on fire'."

Amazon finally updated its in-app purchasing system to require a customer password in March 2012, but only for purchases over $20, which is only a marginal improvement. "Amazon continued to allow children to make an unlimited number of individual purchases of less than $20 without a parent's approval," the complaint notes.

The firm finally added a more sophisticated system in June 2014, almost three years after it added in-app purchasing. This isn't a much shorter timeframe than Apple's previous in-app violations, but then Amazon had allowed its own in-app violations to occur over time with a full understanding that Apple was then being investigated for the same problems. This makes Amazon's behavior much harder to understand or justify.

"Thousands of parents complained to Amazon about in-app charges their children incurred without their authorization, amounting to millions of dollars of charges," the FTC added. "The company's stated policy is that all in-app charges are final and nonrefundable. According to the complaint, even parents who have sought an exception to that policy have faced a refund process that is unclear and confusing, involving statements that do not explain how to seek refunds for in-app charges or suggest consumers cannot get a refund for these charges."

The FTC is seeking full refunds for all affected consumers, "disgorgement of Amazon's ill-gotten gains," which is an excellent phrase, and a court order that prevents Amazon from ever allowing in-app purchases without permission from the account holder. Time to settle up, Amazon. You've already lost this one.