AMAZON.COM IN-APP SYSTEM:
- According to the Federal Trade Commission ("FTC"), Amazon.com, Inc. ("Amazon") offers a variety of children's apps in its "appstore" that are available for download to mobile devices.
FTC COMPLAINT:
- The FTC commenced a lawsuit against Amazon for violations of the FTC Act.
- The crux of the complaint alleges that Amazon billed parents and other account holders millions of dollars for unauthorized in-app charges incurred by children.
- Specifically, the complaint alleges that certain in-app purchases by children did not require their parents' consent, and when the company first introduced in-app purchases, there were no password requirements to authorize charges.
- The FTC alleges that kids' games often encourage children to accumulate virtual items in a manner that blurs the lines between what is actual money versus virtual currency.
- According to internal communication records, the FTC claims that Amazon's employees were aware of the problem of permitting unlimited in-app purchases without a password.
- Despite Amazon's gradual efforts to update its in-app charge system between 2011 and 2013, it was not until 2014 that the company changed the framework to obtain the account holder's informed consent for in-app charges.
- The FTC claims that thousands of parents complained to Amazon about the charges that their children had incurred without their permission.
RELIEF SOUGHT:
- Under the complaint, the FTC is seeking: 1) a full refund for all affected consumers; 2) disgorgement of revenue; and 3) a court order ensuring that in the future, Amazon will get permission before in-app purchases may proceed.
TAKE AWAY:
- Marketing products to children is a delicate business, requiring strict attention to state and federal laws and regulations.
- This is the FTC's second case relating to children's in-app purchases. Earlier this year, the FTC settled a case concerning this issue with Apple Inc.
- For guidance on conducting the proper marketing and business campaign, it is important to consult with experienced counsel.
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