Apple to Refund $32.5m of In-app Purchases Made by Children

Kirsty Styles

Apple App StoreApple has been ordered to refund American parents 'at least' $32.5m (£19.8m) for in-app purchases made by their children without their ‘informed consent'.

‘Tens of thousands’ of complaints had been leveled at the company since early 2011, the Federal Trade Commission said, with many claiming thousands of dollars in charges they didn’t know about. One consumer said her daughter had spent $2,600 in the app Tap Pet Hotel.

The FTC found that Apple was storing users’ passwords for 15 minutes after they had authorised an initial download, enabling children to go on an inconspicuous buying spree. The second accusation was that parents were often simply asked for their password without Apple making it clear that this was to authorise in-app purchases. Both of these violate the FTC Act.

Apple will also have to change its billing practice by 31 March so that parents are clearly informed if entering their password is being taken to authorise a payment. The company must contact all of the people it knows were charged in this way and give them a refund at their request.

In an email to Apple employees obtained by 9to5Mac, CEO Tim Cook said the case wasn't needed as the company was already addressing these issues. Apple has emailed the 28m people who made in-app purchases within kids games and has received 37,000 claims. Of the amount set aside for refunds, this would indicate an average unauthorised charge of around $878 per claimant.

“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,” said FTC Chairwoman Edith Ramirez. “You cannot charge consumers for purchases they did not authorise.”

As Apple only takes 30 per cent of each transaction made, with 70 per cent going to developers, this means they are likely to pay out more than they actually received for each unauthorised payment. But $32.5m is a drop in the ocean compared to the revenues Apple makes in the App Store. Last year, the company made $10bn.

One of the four commissioners working on the case disagreed with the decision. In a statement, Commissioner Wright said he did not feel Apple should have to change its business because of an 'extremely small and arguably, diminishing subset of consumers'. But this kind of problem is not limited to the US, with complaints to premium charge regulators PhonePayPlus growing rapidly in recent years.

The FTC outlined a range of steps it has taken to address issues created by growing smartphone use, including creating guidelines to avoid deception in mobile advertising, to improve transparency on data privacy and to help smooth the transition to mobile payments.