FTC Wins Judgment Against Amazon Regarding Unauthorized In-App Purchases | Practical Law

FTC Wins Judgment Against Amazon Regarding Unauthorized In-App Purchases | Practical Law

The Federal Trade Commission (FTC) won its motion for summary judgment against Amazon, Inc., on the issue of billing consumers for unauthorized in-app charges. A federal court found that Amazon's consumer disclosures were insufficient to inform consumers of in-app charges incurred by children using their devices.

FTC Wins Judgment Against Amazon Regarding Unauthorized In-App Purchases

Practical Law Legal Update w-002-1913 (Approx. 3 pages)

FTC Wins Judgment Against Amazon Regarding Unauthorized In-App Purchases

by Practical Law Commercial Transactions
Published on 29 Apr 2016 • USA (National/Federal)
The Federal Trade Commission (FTC) won its motion for summary judgment against Amazon, Inc., on the issue of billing consumers for unauthorized in-app charges. A federal court found that Amazon's consumer disclosures were insufficient to inform consumers of in-app charges incurred by children using their devices.
On April 27, 2016, the FTC issued a press release announcing a favorable judgment in the agency's lawsuit against Amazon concerning unauthorized in-app purchases. The FTC launched its investigation into Amazon's in-app billing practices in 2012, after Amazon had received a series of complaints from adult customers surprised by charges from in-app purchases made by children. Amazon subsequently made several changes to their billing practices, including:
  • Adding a password prompt for first-time in-app charges, with an option to require a password for all future in-app charges.
  • Reconfiguring its AppStore so that the words "In-App Purchasing" appeared more prominently on an app's description page.
The newest version of these password prompts are not available on Amazon's first generation Kindle devices, for which software updates are no longer available. On these devices, customers may still make in-app purchases of $1 or less without any password authorization.
The FTC filed its lawsuit against Amazon in the U.S. District Court for the Western District of Washington in 2014, seeking both injunctive relief and damages. The court declined an injunction, finding that the potential for ongoing violations on first generation Kindle devices did not merit one.
The court also granted the FTC's Motion for Summary Judgment, holding that Amazon was liable for an "unfair practice" under 15 U.S.C.A. § 45. The court applied the statute's three part test to Amazon's in-app purchase billing practices and found:
  • Consumers suffered substantial injury in the form of charges incurred without express permission.
  • The injury was not reasonably avoidable by consumers, who were not adequately warned of the potential for in-app purchases.
  • The injury was not outweighed by any countervailing benefit to consumers.
The FTC suggested an approximate damages amount but the court has ordered additional briefing on the issue before it makes its final determination.
For more information on FTC consumer protection, see Practice Note, FTC Consumer Protection Investigations and Enforcement.