A court in Amazon’s home city of Seattle on Thursday ordered the ecommerce giant to set up a notice-and-claims process early next year to notify eligible parents of the refunds, and to pay them what’s owed, Reuters reported.
This issue goes back to 2011 when Amazon began allowing in-app purchases, of which the company takes a 30 percent cut. At the time, there were no safeguards in place – for example, password protection for accounts – to stop children from making unauthorized in-app purchases, a situation that led to some parents getting a nasty surprise upon receipt of their credit card bill.
The matter eventually came to the attention of the Federal Trade Commission (FTC), leading it to file a lawsuit against the online retailer in 2014. The commission had estimated that of around $86 million generated by in-app purchases in the Amazon app store, a whopping 42 percent had been made without parental consent, though Amazon described the FTC’s figures as “fundamentally flawed.”
“Unlimited charges”
“Amazon’s in-app system allowed children to incur unlimited charges on their parents’ accounts without permission,” the FTC said at the time, adding that “even Amazon’s own employees recognized the serious problem its process created.” But the company insisted it was making refunds where possible and was adding safeguards to its app store software.
In April of this year, the court sided with the FTC, saying Amazon’s procedures for informing its customers about in-app charges were “not sufficient.”
However, on Thursday, Seattle U.S. District Judge John Coughenour rejected the FTC’s call for Amazon to pay a $26.5 million penalty, insisting that the company must instead notify eligible parents and ask them to make individual claims.
It’s not the first time unauthorized in-app purchases – or the lack of a way to prevent them – have upset the FTC. Following action by the commission, Apple agreed to refund more than $32 million to customers in 2014, while in the same year Google set about paying back $19 million.
All three companies have since put in place stricter procedures to make it harder for children to make unauthorized in-app purchases.
