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FTC Updates Response to Children's App Purchases

16 Jul, 2014 By: Chris Tribbey



The Federal Trade Commission (FTC) has updated its guidance for the Children’s Online Privacy Protection Act (COPPA), in response to concerns raised by app makers and parents, the commission said.

The updated guidance — which offers a more detailed explanation of COPPA, allows for new ways to seek parental consent, including credit card verification, and gives app makers new mechanisms for consent without being classified as an operator — come as the FTC sues Amazon over its in-app purchase policy.

ACT: The App Association, a trade group that represents more than 5,000 app companies and information technology firms, praised the changes. “The FTC’s steps to improve clarity around COPPA removed some major obstacles that discouraged app makers from entering the children’s market,” said ACT executive director Morgan Reed. “We believe now that more companies will embrace the opportunity to make engaging and educational apps for children."

“The FTC’s steps to improve clarity around COPPA removed some major obstacles that discouraged app makers from entering the children’s market. We believe now that more companies will embrace the opportunity to make engaging and educational apps for children."

The Amazon lawsuit, filed July 10, accuses the company of billing parents and other users million of dollars for unauthorized in-app charges incurred by children. Amazon, which keeps 30% of all in-app charges, allowed kids playing games to spend unlimited amounts of money to pay for in-app virtual items, without requiring a password.

“Amazon’s in-app system allowed children to incur unlimited charges on their parents’ accounts without permission,” said FTC chairwoman Edith Ramirez. “Even Amazon's own employees recognized the serious problem its process created. We are seeking refunds for affected parents and a court order to ensure that Amazon gets parents' consent for in-app purchases.

The complaint points to internal communications among Amazon employees who said the unlimited in-app charges without a password were “clearly causing problems for a large percentage of our customers.”

Amazon has slowly updated its in-app requirements calling for a password for every purchase. The FTC wants Amazon to pay consumers back for purchases made before the changes.

According to the complaint, thousands of parents complained to Amazon about the charges, including one woman whose daughter racked up $358.42 in unauthorized charges.

Amazon argues that it’s been responsive and responsible with its in-app purchase policies. “The main claim in the [FTC’s] draft complaint is that we failed to get customers’ informed consent to in-app charges made by children and did not address that problem quickly or effectively enough in response to consumer complaints,” a letter from Amazon to the FTC reads. “We have continuously improved our experience since launch, but even at launch, when customers told us their kids had made purchases they didn’t want we refunded those purchases.”

In January, Apple settled a similar FTC complaint regarding its standards for in-app purchases, paying $32.5 million in refunds to consumers. In March, Google followed suit, giving users the option to have a password required for every app or in-app purchase.


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