Consumers, especially parents whose kids love to make in-app purchases on their iDevices, rejoice. The Federal Trade Commission (FTC) disclosed that Apple agreed to a settlement amounting to at least $32.5 million for in-app purchases made by children on iPhones and iPads without the consent of their parents. In addition to refunding consumers, the company also must ensure that its billing process will be improved so as to seek informed consent before pushing through with mobile apps purchases.
Apple has until March 31 to improve its billing system to make sure consumers are not deceived when making in-app purchases while using an mobile app downloaded from its App Store. The company needs to get an informed consent from account holders before allowing a transaction. The FTC also pointed to the 15-minute window that the system gives after making an authorized transaction. During this said gap, users such as children can make a purchase within an app without the consent or knowledge of their parents.
The settlement resulted from an FTC complaint after the government learned that the iPhone and iPad manufacturer received a lot of complaint about in-app purchases made by children. In-app purchases are transactions done within application such as "Tap Pet Hotel," "Dragon Story," "FIFA 14," or "Tiny Zoo" that may range between 99 cents and $99.99. These days almost all apps allow in-app purchases and young users are inclined to buy virtual currency or items so they can continue or advance in the game they are playing. Not surprisingly, moms and dads later get a bill shock upon learning that their kids were not just tinkering on their gadgets.
"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. You cannot charge consumers for purchases they did not authorize," FTC Chairwoman Edith Ramirez said in a statement.
In the complaint, the commission alleged that Apple violated provisions of the FTC Act.
Apple CEO Tim Cook has sent out an email to employees acknowledging the agreement with the FTC, but not without criticizing the move of the federal government.
"I want to let you know that Apple has entered into a consent decree with the U.S. Federal Trade Commission. We have been negotiating with the FTC for several months over disclosures about the in-app purchase feature of the App Store, because younger customers have sometimes been able to make purchases without their parents' consent," Cook wrote in the email. "From the very beginning, protecting children has been a top priority for the App Store team and everyone at Apple. The store is thoughtfully curated, and we hold app developers to Apple's own high standards of security, privacy, usefulness and decency, among others. The parental controls in iOS are strong, intuitive and customizable, and we've continued to add ways for parents to protect their children."
For Cook, the FTC settlement is a case of double jeopardy but the company decided to agree to the settlement, nonetheless, to avoid lengthy legal fights.
"A federal judge agreed with our actions as a full settlement and we felt we had made things right for everyone. Then, the FTC got involved and we faced the prospect of a second lawsuit over the very same issue. It doesn't feel right for the FTC to sue over a case that had already been settled," Cook said, referring to a settlement it entered with the court for a class-action suit against unauthorized in-app purchases last year.
Apple said it had reached out to 28 million App Store users and received 37,000 complaints from affected customers.
