Feds sue Amazon after parents complain of millions in unauthorized charges made by their kids
WASHINGTON, D.C. – Parents have been complaining for years that their kids were racking up huge bills on Amazon tablets thanks to in-app charges.
Now the Federal Trade Commission has filed suit against Amazon revealing internal emails that seem to show the company allowed the charges to continue with ease intentionally.
Amazon vigorously disputes the claims made in the suit.
“No one is more focused on creating a great experience for our customers than Amazon,” the company said in a letter to the FTC. In the letter the company also said its practices were legal “from the onset” and that the suit is an “unfortunate misallocation of the Commission’s resources.”
FTC lawyers however argue that starting in 2011 Amazon apps marketed to kids encouraged users to get more ‘coins’ ‘stars’ or ‘acorns.’ But each additional item cost money and was billed directly to the account holder’s credit card. In most cases that person was the child’s parent.
One parent told the FTC her child spend more than $350 on in-app purchases before she knew he was doing it because no password was ever required.
Internal Amazon communications obtained by the FTC indicate the company knew parents were angry as early as even a month after the in-app charges were rolled out.
“…clearly causing problems for a large percentage of our customers,” read one section, adding that the situation was a “near house on fire.”
Initially Amazon allowed users to buy in-app add-ons with no password until they reached a $99.99 limit.
In March 2012 they dropped that limit to $20.
Again the FTC points to internal employee communications noting “it’s much easier to get upset about Amazon letting your child purchase a $99 product without any password protection than a $20 product.”
But the FTC said parent complaints did not subside. Internal emails form July of 2012 cited by the FTC said in-app charge complaints were again a “house on fire” situation.
Again the FTC alleged that Amazon waited months before addressing the complaints. In early 2013 the company reportedly again changed in-app purchasing so that a parent was first prompted for a password for a purchase. But the FTC said in its complaint that then an “undisclosed window of 15 minutes to an hour” was opened “during which the child could then make unlimited charges without further authorization.”
The FTC said it wasn’t until last month, shortly before the lawsuit was to be filed, did Amazon change in-app purchase functionality so that a password was required every time.
Rachel Nyswander Thomas with the Direct Marketing Association, an industry trade group, issued a statement in support of Amazon.
“The Federal Trade Commission should be encouraging innovation in the growing mobile industry, which benefits consumers and competition. Instead, the Commission seems focused on using novel legal theories and scarce enforcement resources to go after America’s leading tech companies in court. Amazon reportedly has already done the right thing by enhancing its app market and providing consumer refunds, so consumers have nothing to gain and plenty to lose from the Commission’s lawsuit. Nothing will discourage future innovation faster than punishing good deeds.”
Investigators estimate parents were billed millions of dollars in total since 2011. The suit seeks full refunds for all parents and to permanently ban Amazon from billing account holders for in-app purchases without consent.