Judge Sides with FTC in Amazon In-App Purchases Lawsuit

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On Tuesday, a Washington federal judge sided with the Federal Trade Commission and will require Amazon.com Inc. to compensate consumers whose children made in-app purchases on Android mobile devices or Kindle Fire tablets without their permission.

U.S. District Judge John Coughenour made this determination even though Amazon has reportedly already issued refunds to many consumers who requested them. However, the judge did agree with Amazon that an injunction was not necessary to prevent potential future violations.

The FTC filed the lawsuit against Amazon in 2014, shortly after Apple Inc. agreed to pay $32.5 million to settle similar allegations that it had allowed children to spend millions of dollars on in-app purchases without the knowledge or consent of their parents.

When Amazon introduced in-app charges in November 2011, the default setting reportedly allowed users to make in-app purchases without entering a password. These in-app charges were available in kids’ games and other kid-friendly apps.

The Amazon Appstore offers a wide variety of apps that allow users to play games, watch movies, read books or perform other activities on their tablets or mobile devices. Some apps are free to download while others must be purchased. Some apps enable in-app purchases that allow users to participate in various activities within the app.

“Many apps geared towards children, and likely to be used by children, offer in-app purchases,” the judge wrote in his order. “For example, a child may be prompted to use or acquire seemingly-fictitious currency, including a ‘boatload of doughnuts, a can of stars, and bars of gold,’ but in reality the child is making an in-app purchase using real money.”

Although Amazon users could establish parental controls to prevent their children from making unauthorized in-app purchases, many consumers were reportedly unaware that the children’s games allowed in-app purchases, especially because many of the apps they downloaded from the Amazon Appstore were free.

Further, the judge notes that even when Amazon introduced password prompts for in-app purchases in March 2012, the online retail giant did not make it clear to consumers that a single password entry could authorize multiple in-app purchases within a certain timeframe. Despite receiving numerous complaints from customers, Amazon reportedly did not provide any information to consumers about how to obtain refunds, or if refunds were even available for in-app purchases.

“Amazon argues that because of its liberal practices around providing refunds, its customers were not injured,” Judge Coughenour wrote in his order. “Amazon’s argument conflates complaints with the total universe of injury. However, given the design of the Appstore and procedures around in-app purchases, it is reasonable to conclude that many customers were never aware that they had made an in-app purchase.”

Judge Coughenour also noted that the time spent pursuing refunds from Amazon for their children’s unauthorized in-app purchases constitutes an additional injury. However, he has not yet decided on an appropriate remedy for the affected consumers.

The FTC is represented by Jason Adler, Heather Allen, Jane Ricci, Miya Tandon, Katharine Roller, Helen Wong and Laura Solis.

The Amazon In-App Purchases Lawsuit is Federal Trade Commission v. Amazon.com Inc., Case No. 2:14-cv-01038, in the U.S. District Court for the Western District of Washington at Seattle.

UPDATE: In May 2017, the Federal Trade Commission announced that Amazon Inc. will be refunding money to customers whose children made unauthorized in-app purchases on “free” games.