Court Finds Amazon Liable for Unauthorized Kid’s In-App Charges

The Federal Trade Commission sued Amazon in federal court in Seattle, alleging that the billing of parents and other account holders for in-app purchases incurred by children “without having obtained the account holders’ express informed consent” violated the FTC Act.  Under the FTC Act, acts or practices are considered unfair if

  • they cause or are likely to cause substantial injury to consumers;
  • the injury is not reasonably avoidable by consumers, and
  • the injury is not outweighed by any countervailing benefits to consumers or competition.

Judge Coughenour granted summary judgment in favor of the FTC on the question of liability.

(1) Substantial Injury

The Court stressed that “billing customers without permission causes injury” under the FTC Act.  It rejected Amazon’s argument that its liberal refund policies negated any injury, not only because the time spent pursuing refunds constitutes additional injury, but because 

 Amazon’s argument conflates complaints with the total universe of injury. However, given the design of the App store and procedures around in-app purchases, it is reasonable to conclude that many customers were never aware that they had made an in-app purchase. 

(2) Mitigation

Amazon argued that harm to the consumer was reasonably avoidable since consumers could exercise parental controls.  The court rejected this argument, noting that it is unreasonable to expect customers to be familiar with the potential to accrue in-app purchases while using apps labeled as ‘FREE.’”

(3) Countervailing Benefits

Amazon attempted to argue that failing to require a password before a purchase was a benefit since “consumers prefer a seamless, efficient mobile experience”.  The court rejected this flat out.

First, even accepting as true the notion that consumers prefer a seamless and efficient experience, the ‘benefit’ of ensuring a streamlined experience is not incompatible with the practice of affirmatively seeking a customer’s authorized consent to a charge. In fact, a clear and conspicuous disclaimer regarding in-app purchases and request for authorization on the front-end of a customer’s process could actually prove to better inform customers about their risk of accruing in-app purchases and be more seamless than the somewhat unpredictable password prompt formulas rolled out by Amazon

The case now proceeds to calculation of damage to consumers.