Apple Settles With FTC Over Kids’ App Spending

Apple owes consumers $32.5 million over purchases of “Tiny Zoo Friends” and other apps.

Children play with iPads and the apptivity app at Westfield shopping Centre on August 21, 2012 in London, England. The new app from toy maker Mattel allows children use Hot Wheels, Batman, WWE and other toys to interact with an Apple iPad.
National Journal
Brendan Sasso
Jan. 15, 2014, 9:20 a.m.

Apple agreed on Wed­nes­day to re­fund at least $32.5 mil­lion to par­ents whose chil­dren made di­git­al pur­chases without their per­mis­sion.

The re­funds are part of a set­tle­ment with the Fed­er­al Trade Com­mis­sion, which ac­cused Apple of an un­fair busi­ness prac­tice for fail­ing to ad­equately ex­plain how its billing sys­tem worked.

“This set­tle­ment is a vic­tory for con­sumers harmed by Apple’s un­fair billing, and a sig­nal to the busi­ness com­munity: Wheth­er you’re do­ing busi­ness in the mo­bile arena or the mall down the street, fun­da­ment­al con­sumer pro­tec­tions ap­ply,” FTC Chair­wo­man Edith Ramirez said in a state­ment.

“You can­not charge con­sumers for pur­chases they did not au­thor­ize.”

When users enter their pass­words on their iPhones or iPads, it opens a 15-minute win­dow al­low­ing them to make as many pur­chases as they want without reen­ter­ing their pass­word. The fea­ture is in­ten­ded to make it easi­er to buy new items for mo­bile ap­plic­a­tions, but many par­ents didn’t real­ize that they were open­ing a 15-minute win­dow for pur­chases when they entered their pass­word.

As a res­ult, tens of thou­sands of par­ents handed their devices back to their chil­dren, who then racked up hun­dreds or even thou­sands of dol­lars in spend­ing sprees for in-app items, ac­cord­ing to the FTC.

One con­sumer told the FTC that her child spent $2,600 on ex­tra fea­tures for the “Tap Pet Hotel” app. Oth­er chil­dren spent hun­dreds of dol­lars on di­git­al gold, coins, and food for “Dragon Story” without their par­ents’ know­ledge, the FTC said. The app “Tiny Zoo Friends” al­lowed chil­dren to spend up to $99.99 for in-game “bucks.”

The set­tle­ment re­quires Apple to provide full re­funds to all par­ents whose chil­dren bought in-app items without their per­mis­sion. The com­pany will have to no­ti­fy all users who made in-app pur­chases about the avail­ab­il­ity of the re­funds, and if con­sumers claim less than $32.5 mil­lion, the re­mainder will go to the FTC.

Apple also agreed to change its billing sys­tem to en­sure it ob­tains users’ “ex­press, in­formed con­sent” be­fore char­ging them for any in-app pur­chases.

“The prob­lem we’ve iden­ti­fied in our com­plaint con­tin­ues to this day,” Ramirez said, adding that Apple has un­til March un­der the terms of its set­tle­ment to change its prac­tices.

Apple did not re­spond to a re­quest for com­ment.

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