The U.S. Federal Trade Commission has issued the following press release, verbatim:
Apple Inc. has agreed to provide full refunds to consumers, paying a minimum of $32.5 million, to settle a Federal Trade Commission complaint that the company billed consumers for millions of dollars of charges incurred by children in kids’ mobile apps without their parents’ consent.
Under the terms of the settlement with the FTC, Apple also will be required to change its billing practices to ensure that it has obtained express, informed consent from consumers before charging them for items sold in mobile apps.
“This settlement is a victory for consumers harmed by Apple’s unfair billing, 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 FTC Chairwoman Edith Ramirez. “You cannot charge consumers for purchases they did not authorize.”
The FTC’s complaint alleges that Apple violated the FTC Act by failing to tell parents that by entering a password they were approving a single in-app purchase and also 15 minutes of additional unlimited purchases their children could make without further action by the parent.
Apple offers many kids’ apps in its App Store that allow users to incur charges within the apps. Many of these charges are for virtual items or currency used in playing a game. These charges generally range from 99 cents to $99.99 per in-app charge.
The complaint alleges that Apple does not inform account holders that entering their password will open a 15-minute window in which children can incur unlimited charges with no further action from the account holder. In addition, according to the complaint, Apple has often presented a screen with a prompt for a parent to enter his or her password in a kids’ app without explaining to the account holder that password entry would finalize any purchase at all.
The rapidly expanding mobile arena has been a focus of the Commission’s consumer protection efforts. In addition to its consumer protection enforcement activity in the mobile sphere, last year, the FTC issued staff reports addressing mobile payments and providing recommendations for the mobile industry on how to protect consumers as new and innovative payment systems come into use, advocating improved privacy disclosures in the mobile environment, and addressing advertising disclosures in the context of mobile devices.
In its complaint, the FTC notes that Apple received at least tens of thousands of complaints about unauthorized in-app purchases by children. 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.” According to the complaint, consumers have reported millions of dollars in unauthorized charges to Apple.
The settlement requires Apple to modify its billing practices to ensure that Apple obtains consumers’ express, informed consent prior to billing them for in-app charges, and that if the company gets consumers’ consent for future charges, consumers must have the option to withdraw their consent at any time. Apple must make these changes no later than March 31, 2014.
Under the settlement, Apple will be required to provide full refunds, totaling a minimum of $32.5 million, to consumers who were billed for in-app charges that were incurred by children and were either accidental or not authorized by the consumer. Apple must make these refunds promptly, upon request from an account holder. Apple is required to give notice of the availability of refunds to all consumers charged for in-app charges with instructions on how to obtain a refund for unauthorized purchases by kids. Should Apple issue less than $32.5 million in refunds to consumers within the 12 months after the settlement becomes final, the company must remit the balance to the Commission.
The Commission vote to accept the consent agreement package containing the proposed consent order for public comment was 3-1, with Commissioner Wright voting no. Chairwoman Ramirez and Commissioner Brill issued a joint statement, and Commissioner Ohlhausen issued a separate statement. Commissioner Wright issued a dissenting statement.
The FTC will publish a description of the consent agreement package in the Federal Register shortly. The agreement will be subject to public comment for 30 days, beginning today and continuing through Feb. 14, 2014, after which the Commission will decide whether to make the proposed consent order final. Interested parties can submit written comments electronically or in paper form by following the instructions in the “Invitation To Comment” part of the “Supplementary Information” section. Comments in electronic form should be submitted online and following the instructions on the web-based form. Comments in paper form should be mailed or delivered to: Federal Trade Commission, Office of the Secretary, Room H-113, 600 Pennsylvania Avenue, N.W., Washington, DC 20580. The FTC is requesting that any comment filed in paper form near the end of the public comment period be sent by courier or overnight service, if possible, because U.S. postal mail in the Washington area and at the Commission is subject to delay due to heightened security precautions.
NOTE: The Commission issues an administrative complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of up to $16,000.
Source: Federal Trade Commission
Related articles:
Apple’s Cook settles with FTC over kids’ In-App Purchases rather than endure legal fight – January 15, 2014
Apple refunds 8-year-old girl’s $6,000 bill for in-app purchases – July 21, 2013
Apple notifies parents of In-App Purchase settlement details – June 24, 2013
In-App Purchasing lawsuit against Apple allowed to proceed – April 21, 2012
Parents sue Apple over in-app charges – April 16, 2012
Lack of parental controls on Amazon’s tiny screen Kindle Fire lets kids charge up a storm – December 12, 2011
Freemium and Apple’s App Store: The in-app purchasing model really works – October 14, 2011
While it’s great that Apple is addressing this issue in the form of refunds, something greater needs to be done about the amount of apps containing in app purchases targeting children.
I think you’re right. There should be an App Store icon or something that signals that the app (and not just those targeted at children) utilizes in-app purchasing. There is nothing inherently wrong with in-app purchasing; it’s up to the developer to use it judiciously, but I’d rather spend the extra money up front to buy an app that won’t pester me.
In the App Store, ALL apps show you if there are In-App purchases,what they are, what they cost, etc. If you child wants to buy a free game on your iTunes account, that is the first place you can look. Just got to read the app description and take some parental responsibility before buying the thing for your kid….. Oh yeah…. and don’t forget to turn OFF in-app purchase ability in parental restrictions. Problem solved. No $$$ surprises. But again, that takes some parental responsibility….
American + British parents = dumb + dumber.
As a parent I’d love to argue that point but it’s amazing how clueless some parents are. I realize some app developers are basically running scams with in-app purchases but if your kid runs up a $2600 bill with in app purchases you need to look in the mirror to find fault. There is no way that happens in one 15 min window. My kids wouldn’t think about making a purchase without asking first even if that 15 min window is still open.
Why are the parents dumb enough to give their children their Apple ID and password?
They don’t. It works like this: you give kid your iPhone to play. Kid walks up and shows you cute game that is free to download but needs your password. You take the IPhone and type in your password (the kid is not supplied password). Kid goes off to play game and within 15 minutes (App Store keeps previous authorization open for this amount of time) is prompted to buy some item that allow the game to continue. Kid presses “Okay” and that’s all it takes for the purchase to transact. No additional authorization needed from the account holder.
You can set the time limit in restrictions. Why it’s not set to immediately by default is anyone’s guess
Agreed.. Or why not have a setting that allows App Store App purchases but requires a 2nd login for in-app purchases.. Surely the App Store can make a distinction between the purchase of an App and a purchase made through that same App..
So, if I understand you correctly, a developer who understands this family living-room dynamic can craftily offer enticements to new young gamers within the default window of permission. That developer is a rare genius of usage metrics, demonic in his acquisitiveness and gleeful at his triumph over Apple’s stifling and insulting app policies. He is also a conscienceless child predator and a chameleon who will skip to Rio and fund a new, dubious Internet startup with his ill-gotten gains.
Yes, it is clear that the parental role plays no part whatever in this scenario, except as tech-illiterate dupes exploited by experts in social engineering, masquerading as game developers.
Other than that the parents are as pure as the driven f****** snow.
No, what they do is enter the password for something else and later hand it back to the kid. I warn parents to fully power down to clear the password and then hand it to the child after it boots back up.
If there is an easier way to clear passwords, I don’t know it. A “Flush Password in Memory” button would be helpful. Or a bio-identification could also work if it was part of the iOS. How about a “Guest” option in the pop up section near the flash light, Wi-Fi, BlueTooth, … “Guest” creates a safe multi user option like the one in the old Mac OS.
You can remove the 15 minute window in Settings > General > Restrictions. You can also turn off in-app purchases and have been able to do both for a very long time.
I don’t feel bad for these parents. Why are they not monitoring what their kids are doing? Why are they letting a phone babysit the kid?
It was somewhat comical to watch Chairperson Ramirez deliver this press release in person. She seemed to think that she had somehow won a great victory against an evil giant, when in reality Apple was already giving out these refunds voluntarily. i/t was clear from watching her in person that she was clueless and in over her head. Is this the best that this administration could come up with?
lol, hell she’s the cream of the crop. If it was Holder, One Infinite Loop would be teeming with ATF agents.
She clearly would have been in over her head as an elementary school administrator, and they made her the chairperson of the FTC? Amazing.
an app that says “free” should be just that. should either immediately ban all in-app purchases or do not call them free when they are originally offered.
Exactly.
I told them there should be three categories, but their zen zealotry blinded them to the virtues of my practical economics. I told them, you can’t be simply user-centric with the App store; you have to provide for your suppliers, and 70% won’t cut it after downloads tail off. Goosing it with promotions works for a minute, and then you’re back to cutting back your programming staff.
It was inevitable that something insidious like in-app purchases would rise to replace an anemic and non-sustaining business model. Apple might have seen this coming but through negligence, didn’t. Now that it is here and scarred them for 32.5 million dollars, I hope to hell someone at One Infinite Loop has awoken. Don’t become like Google, a prisoner of the algorithms that made them successful. Break away from that with fresh ideas, hopefully ones that don’t create new kinds of victims.
So people get to keep the apps and the in-app purchases…
Hey my kid ordered a MacPro! I want my money back!
The apps are free and the IAPs are buy, use, repeat. That is the problem
It’s about time these pervs paid up. Cook is a lying assdog. Took his fellow asslibs to return the stolen money to families. Next time, throw that assfag into the slammer.
So when does the FTC go after Google Play?
And so it is that parents demand that a company pay for the dishonest behavior of their children rather than correcting the problems before it is too late.
We are talking kids <10yo in most cases. I've seen 1 report of a 13 year old, that should have been handled by the parents but the problem lies mainly with developers backed up by Apples previous restrictions implementation in iOS 6
So, Apple has historically refunded mistaken purchase by kids (and adults). Apple has historically provided a means to set up parental restrictions to prevent children from making in-app purchases. Apple provides free, best in the world, tech support when you buy any of their iOS devices to assist in setting up devices for your particular uses and family concerns. Apple publishes self help docs to show customers how to restrict their kid’s usage. Apple voluntarily contacts anyone possibly affected by this and offers refunds. AND STILL THE FTC STILL PUNISHES THEM and promises to take any money NOT claimed after all possible parties are compensated (for their own inability to utilize built in features of their own devices and failure to monitor their own children…..)….???
This is why we have to print, “Caution. Hot beverage.” on coffee cups in the USA.
Does any one remember the quote, “Who is John Galt?”
Truly, it is an unjust world, and the righteous weep for the innocent.
I worked out it’s cheaper to buy a Playstation 4 game than to play Clash of Clans.