Apple and FTC reach agreement about children’s app purchases

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FTC and Apple enter into agreement with Apple on children’s apps

FTC enters into agreement with Apple on children’s apps

The Federal Trade Commission announced that it has entered into a consent decree with Apple regarding alleged charges that Apple allowed children to purchase apps and make in-app purchases on its app store.

The FTC accused Apple of failing to inform parents that there is a 15-minute window when a parent enters a password to purchase an app. Without that knowledge, the commission alleges that children have been able to purchase apps within that period without parental knowledge.

The agreement requires Apple to pay a minimum of $32.5 million in refunds to parents for unauthorized charges,  but if requests are below that, the difference will be paid to the FTC.  The FTC said it aims to achieve “full consumer redress,” and there is no maximum on what Apple will have to pay, if the claims exceed the $32.5 million.”

At a press conference FTC chair Edith Ramirez added that the FTC  is also putting controls on how Apple handles in-app purchases. Apple will be required to obtain “informed consent for charges to consumers.”  The order requires Apple to send out an email to potentially affected consumers with information on how to apply for a refund. She said that the basic principal that Apple agreed to will also apply to other companies. Apple, according to the FTC, “also will be required to change its billing practices to ensure that it has obtained express, informed consent from consumers before charging them for items sold in mobile apps.”

Just ahead of the press conference, published an email from Apple CEO Tim Cook to employees about the settlement.  Cook said that Apple is already doing what the settlement calls for and that “ It doesn’t feel right for the FTC to sue over a case that had already been settled. To us, it smacked of double jeopardy.”  Cook said “the 15-minute window had been there since the launch of the App Store in 2008 and was aimed at making the App Store easy to use, but some younger customers discovered that it also allowed them to make in-app purchases without a parent’s approval.”

In response to my question, Ramirez said that  ”Apple was aware of this issue since at least March of 2011″ and that “in our view the problem continues.” In response to another reporter, Ramirez said that the agreement goes beyond the earlier settlement and “provides more robust relief.” It also requires Apple to change its practices to assure that there is proper notice given to account holders and parents so that they understand that the 15 minute window is being opened when they give consent.

In a statement, Ramirez called the settlement ““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.”