FTC Goes After Amazon Over Unlawful In-App Charges

The in-app plague has reached Amazon, and the Federal Trade Commission has taken notice. The FTC on Thursday announced its intentions to sue Amazon, alleging the online retailer "unlawfully billed parents for millions of dollars in children's unauthorized in-app charges." If found guilty, Amazon will be required to refund effected accounts, and permanently ban the company from billing users for in-app charges without their consent.

According to the FTC, Amazon uses a sneaky tactic that requires no password or other parental consent for charges in kids' apps. This, as the FTC alleges, has led to millions of dollars in charges; Amazon keeps 30-percent of all in-app purchases, so you could imagine the kind of money it took in through the unauthorized charges.

"Amazon's in-app system allowed children to incur unlimited charges on their parents' accounts without permission," said HTC Chairwoman Edith Ramirez. "Even Amazon's own employees recognized the serious problem its process created."

In-app purchases has been a hot-button topic in app stores for years now, though some of the bigger stores have introduced safeguards to avoid issues like this. Amazon introduced in-app charges to its Appstore back in 2011, though no protection was set up that required children to get their parents' permission before purchasing an item in-game. Many freemium games encourage players to pay for upgrades and other items; when you throw kids into the equation with little monetary understanding, things can go downhill pretty fast.

In addition to the complaint, the FTC also alleges that Amazon employees recognized there was an issue, and even said it was "causing problems for a large percentage of our customers." Amazon eventually implemented limited safeguards in March 2012, requiring an account holder to enter a password for in-app purchases over $20. That's all well and good, but it didn't exclude smaller charges; you'd be surprised how easily you can rack up a large bill with $1, $5 and $10 purchases.

Eventually, Amazon implemented a brand new policy in June 2014, which required account holders to enter their password for all in-app purchases. Amazon has a strict policy that says all in-app purchases are nonrefundable, but because of the company's early practices, and acknowledgement that there was a problem with its in-app system, the FTC clearly disagrees.

Apple earlier this year settled a complaint with the FTC regarding in-app purchases, and it sure looks like there's a case to be made with Amazon, too. We'll bring you more as Amazon responds to the allegations.