Google agrees to pay $19 million in FTC in-app kids lawsuit

September 4, 2014

(By Andrew Harrer/Bloomberg)

Federal officials on Thursday announced Google has agreed to settle charges and repay $19 million to consumers whose children were allegedly deceived into making mobile purchases through the Android app store.

Since 2011, according to the Federal Trade Commission, Google made it too easy for children to use Android phones to buy items ranging from 99 cents to $200 in kids-oriented games without a parent's permission.

The settlement is the latest in the FTC's three-year investigation into so-called "in-app purchases" on devices running software by Apple, Amazon and Google. The enforcement agency has said the purchases are deceptive and particularly harmful for children. Apple agreed to a $32.5 million settlement last January. Amazon in July said it would fight similar charges brought by the FTC.

The FTC has alleged that the major technology companies did not properly disclose to parents and children the ability to purchase items within games and other children's-oriented apps. Parents have filed civil lawsuits against the companies, too, criticizing the firms and apps developers for what they describe as predatory practices that target children to buy $99 gold coins and other items within games. Children, they say, were at times able to buy those items -- later billed to parents -- without any safeguards such as apps store passwords. Apple has changed its practices, and Amazon has offered parental safety tools to prevent unwanted purchases.

“For millions of American families, smartphones and tablets have become a part of their daily lives,” FTC Chairwoman Edith Ramirez said in a release. “As more Americans embrace mobile technology, it’s vital to remind companies that time-tested consumer protections still apply, including that consumers should not be charged for purchases they did not authorize.”

At first, Google didn't require passwords for in-app purchases. In 2012, though, following criticism from parents, it began to use pop-up password boxes. The FTC said the company didn't explain, however, that by putting in a password once, kids had a 30-minute window to rack up as many charges as they wanted. The FTC said even as Google faced a class action lawsuit and heavy criticism -- along with Apple and Amazon -- over in-app purchases being too easy for children, the company didn't do enough to explain its practices or change them to protect consumers.

Parents, meanwhile, continue to complain about hundreds, even thousands of dollars in unauthorized charges. Parents said their kids didn't fully understand that a virtual in-app purchase for something like gold coins to advance game levels cost real money. The apps and software firms also made it too hard to understand their systems for in-app purchases, parents said.

In its release, the FTC said Google employees internally referred to the problem as "family fraud" and "friendly fraud." Apple and Google have changed their practices since the FTC's investigations and refund accounts.

Last month, author and mother of four, Ayelet Waldman blasted the Kim Kardashian app after her son spent $120 for things like virtual clothing.

Google said in a statement that it has worked to change its in-app purchases.

"We're glad to put this matter behind us so we can focus on creating more ways for people to enjoy all the entertainment they love," Google said.

Google has agreed to fully refund unauthorized in-app charges incurred by children and get "express, informed consent" from consumers for in-app purchases. The company said all Android customers who have made in-app charges will hear from Google about how they can get refunds.

 

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Cecilia Kang is a staff writer covering the business of media and entertainment.
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