Apple to refund at least $32.5 million in disputed kids' app purchases

Wed Jan 15, 2014 5:46pm EST
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By Diane Bartz and Alina Selyukh

WASHINGTON (Reuters) - Apple Inc will refund consumers at least $32.5 million to settle a longstanding complaint that the technology company billed U.S. consumers for charges incurred by children through mobile apps without their parents' consent.

Under the terms of the settlement, announced on Wednesday by the U.S. Federal Trade Commission, Apple also will be required to change its billing practices to ensure it obtains consent from parents before charging for such in-app spending.

"Whether you're doing business in the mobile arena or the mall down the street, fundamental consumer protections apply," said FTC Chairwoman Edith Ramirez. "You cannot charge consumers for purchases they did not authorize."

She estimated that children spent millions of dollars without their parents' knowledge, with one mother telling the agency that her daughter spent $2,600 while playing the game "Tap Pet Hotel."

Ramirez said the commission had received "tens of thousands of complaints" from consumers over the unauthorized purchases through apps such as Dragon Story and Tiny Zoo Friends.

In a memo to employees, Apple CEO Tim Cook referred to a class action settlement reached in June which required the company to pay around $100 million to parents whose children made unauthorized purchases.

"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 wrote. "However, the consent decree the FTC proposed does not require us to do anything we weren't already going to do, so we decided to accept it rather than take on a long and distracting legal fight."

The FTC complaint alleges that Apple does not inform account holders that entering their password in the company's App Store opens a 15-minute window in which children can incur unlimited charges with no further action from the account holder   Continued...

Apple CEO Tim Cook speaks about the number of Apps downloaded during an Apple event in San Francisco, California in this file photo from March 7, 2012. REUTERS/Robert Galbraith/Files