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.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.