The FTC said in its suit that it seeks a court order for the company to pay refunds to families affected by the unauthorized charges that began in 2011. It also wants the court to permanently ban Amazon from charging parents for in-app purchases without their consent.
Amazon, whose chief executive Jeffrey P. Bezos owns The Washington Post, did not immediately respond to the lawsuit. But a spokeswoman pointed to a letter sent to FTC Chairwoman Edith Ramirez saying the decision was "deeply disappointing" and that the firm has improved its controls since the Amazon app store was first launched in 2011.
The FTC alleges that after the app store launch in November 2011, Amazon violated the FTC Act by billing parents for charges incurred by their children without permission. Amazon's Kindle Fire tablet was used by children to play games and spend "unlimited amounts of money" to pay for virtual items within the apps such as “coins,” “stars,” and “acorns” without parental involvement, the agency wrote in a release. The FTC said that at first, no password requirements were put in place to stop children from making the purchases.
“Amazon’s in-app system allowed children to incur unlimited charges on their parents’ accounts without permission,” Ramirez said. “Even Amazon's own employees recognized the serious problem its process created. We are seeking refunds for affected parents and a court order to ensure that Amazon gets parents' consent for in-app purchases."
Just a month after apps were introduced into Amazon's store, internal e-mails between staff showed the company was concerned about in-app purchases being made without password protection, according to the government. It was “…clearly causing problems for a large percentage of our customers,” said an e-mail cited in the FTC's suit. The situation, according to the Amazon e-mail, was a “near house on fire.” The FTC said thousands of parents complained to Amazon about charges made by children through in-app purchases.
The company changed its policy in 2012, requiring passwords for purchases over $20. Still, complaints piled up, according to the FTC suit. In 2013, it required greater password protections but still allowed for a 15-minute window for unlimited purchases after an authorizing password was used.
It took the FTC's lawsuit, approved last month, for Amazon to further strengthen its in-app purchases policy for newer devices, the FTC said.
Lawmakers and child development experts have criticized in-app purchases in child-oriented apps because children often don't realize they are making real purchases for items such as gold coins that ultimately show up on their parents' bills.
In the game Ice Age Village, for instance, gold coins and acorns can be purchased for as much as $99 per item. One mother complained to Amazon of $358.42 in unauthorized charges, according to the FTC; some parents complained to the company that children who could not read were able to “click a lot of buttons at random” and rack up charges.
Privacy advocate Jeffrey Chester said Amazon's refusal to settle with the FTC showed it "places making money over the interests of its customers."
"As Amazon gears up to release a new phone, and expands its impact on the mobile industry and consumer rights, the FTC’s complaint should serve as a wake-up call for better corporate ethics,” he said.
The FTC's suit comes after several weeks of talks with Amazon about the company's policy for in-app purchases. The FTC asked for the Seattle retailing and tech giant to abide by guidelines the agency has put forward for rival Apple, which settled FTC charges along these lines earlier this year.
In the July 1 letter to Ramirez, Amazon said it shouldn't be held by the same requirements as Apple. The company has said it prefers to defend its policy for disclosures in court.
"We have continuously improved our experience since launch, but even at launch, when customers told us their kids had made purchases they didn't want we refunded those purchases," wrote Andrew C. DeVore, Amazon's vice president and associate general counsel.