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FTC Sues Amazon Over Unfair Billing Practices

The FTC has sued Amazon over its in-app billing practices. In the lawsuit, the FTC alleges that parents have been unlawfully charged millions of dollars by allowing their children to play with apps on smart phones and other devices.

Smartphone%20%26%20baby%2052239469-001.jpgThe apps are frequently free to download. Although free play is possible, the availability of in-app purchases that provide access to higher game levels or other enhanced experiences are common. The trouble is, children can easily authorize these purchases with the touch of a button. No passwords or authorization are required. Without mom and dad’s knowledge, it’s easy for a kid to rack up hundreds of dollars of charges worth of in-app purchases.

When the credit card bill arrives, the parents often complain to Amazon. Although Amazon states that they have offered refunds to customers who complained about the practice, the FTC feels they haven’t gone far enough. In their complaint, the FTC levels accusations at Amazon of unfair billing practices that violate Section 5 of the FTC Act. T-Mobile and Apple have both been the subject of similar FTC lawsuits.

Andrew Devore, an attorney for Amazon, stated in a letter that the organization’s in-app purchase policies are “responsible, customer focused and lawful.” Moreover, he notes that Amazon utilizes “prominent notice of in-app purchasing … (and) effective parental controls …”

In a move that seems as if it was designed to help head off the litigation, Amazon made password entry a requirement for making in-app purchases that exceed $20 in March of 2012. However, the FTC seems to feel that this was a case of too little, too late. The two parties tried to reach an agreement before the lawsuit was filed. Amazon resisted the deal that the FTC proposed, particularly because they feel that their billing policies are at least as stringent as those recently enacted at Apple in response to another FTC lawsuit.

Both parties in the pending litigation seem motivated to maintain their stance. Time will tell what the resolution will be, and what effect it might have on the future of in-app purchases at Amazon and from other providers.