United States: FTC $19 Million Settlement With Google: Unauthorized In-App Charges Are Not Child’s Play

Last Updated: January 2 2015
Article by Jenna N. Felz

The FTC recently approved a final Order resolving allegations that Google unfairly billed customers millions of dollars for unauthorized charges made by children using mobile apps downloaded from the Google Play app store. Under the settlement, first announced in September, Google will provide full refunds to consumers charged for purchases of items within mobile apps ("in-app purchases") without their consent. Google must provide at least $19 million in customer refunds and remit the balance to the FTC if refunds do not reach that amount.

The FTC's complaint alleged that Google, which began offering in-app purchases through the Google Play app store in 2011, did not have any protection to prevent unauthorized in-app purchases until mid-2012, when it added a password prompt. This, according to the FTC, constituted deceptive and unfair trade practices in violation of Section 5 of the FTC Act. The FTC found Google's 2012 addition of password protection to be insufficient, however, since the prompt did not display the amount to be charged to the account and did not inform consumers that entry of a password would start a 30-minute window in which charges could be made without reentering a password.

The FTC's Order requires Google to obtain express, informed consumer consent for all in-app purchases. If an app gets consumers' consent to make future charges, consumers must have the option to withdraw their consent at any time. Furthermore, it requires Google to provide the FTC with evidence of compliance with the Order for the next five years, including all complaints and refund requests from U.S. consumers related to unauthorized in-app charges.

The FTC's settlement with Google marks its third such case over unauthorized in-app charges by children. The Commission reached a similar settlement with Apple in January, in the amount of $32.5 million. Additionally, the FTC brought an action against Amazon.com in July, following Amazon's refusal to enter into a consent order over allegations that Amazon engaged in similar trade practices with its children's apps. That litigation is still pending, with the District Court for the Western District of Washington recently denying Amazon's motion to dismiss.

The FTC's settlement with Google further confirms the FTC's commitment to monitoring and targeting deceptive and unfair trade practices in the mobile technology marketplace. The FTC released a report last year addressing mobile payments and providing guidance to mobile app companies to comply with evolving consumer protection regulations. Companies with mobile apps and mobile billing systems should take note of the Google settlement, as it further confirms guidance the FTC has already provided on mobile apps and signals the FTC's willingness to pursue offenders.

  • First, it is important to get consumers' express consent before billing for in-app purchases. This entails fully informing consumers about the nature, extent, and duration of charges to be incurred through the use of mobile apps. While conveying this information need not be overly burdensome, merely having a password prompt is insufficient notice to consumers, as evidenced by the Google settlement. Mobile apps must also disclose the amount to be charged to the consumer's account and inform consumers if a time window of password-free in-app purchases is about to begin.
  • Second, mobile apps must allow consumers to revoke their consent to be charged at any time after providing such consent.
  • Finally, businesses that market mobile apps to children should exercise extra caution in their billing practices to minimize the potential risk that a child could incur unauthorized charges on a parent's account.

The FTC's guidance on issues surrounding mobile apps is ever-evolving. BakerHostetler lawyers are experienced in helping clients navigate this developing area of law.

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.

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