By Alex Samaei
Has a child ever made an in-app purchase on your phone when you’re not looking? Well, the Federal Trade Commission (“FTC”) and Amazon have recently settled a long-running lawsuit which could entitle you to a refund. Amazon held out in this decision as Apple and Google both settled years ago, avoiding litigation altogether.
In 2016, a U.S. federal judge found that Amazon had failed to comply with notice-and-claims procedures for in-app purchases. This decision compelled Amazon to include a notice that refunds are possible for in-app purchases by children under the age of 18 and those transactions unauthorized by the account holder. These reimbursements are expected to exceed $70 million to eligible users charged between November 2011 and May 2016.\
The statute violated by these companies is Section 5 of the FTC Act, 15 U.S.C. § 45(n) which makes unlawful unfair practices “likely to cause substantial injury to consumers which is not reasonably avoidable by consumers themselves.” In this context it seems straightforward considering the Amazon Appstore originally did not have any password protection and failed to clear indicate that certain free applications contained in-app purchases. However, in the legal analysis the Act requires a three-step process: Acts are “considered unfair if (1) they cause or are likely to cause substantial injury to consumers, (2) the injury is not reasonably avoidable by consumers, and (3) the injury is not outweighed by any countervailing benefits to consumers or completion.”
Examining each of these parts the Court properly found that Amazon had violated each element. First, there were substantial injuries because many customers were billed without permission. Simply offering an easy to use refund system does not remove that injury from the customers. Second, a lengthy discussion concluded that the charges could not be easily avoided. Amazon made a compelling argument around the availability of parental controls, mentioning in-app purchase in the description, and easy refund system. The court in the end concluded that labeling the overall applications as “free” could be misleading, especially when the in-app references in the description were not easily noticeable. Last, the court noted that there were no benefits to this billing practice even if it created a seamless and efficient mobile experience.
FTC v. Amazon is another example of the need for clear contracts and processes within online programs. Hopefully with large companies such as Amazon, Google, and Apple having to settle for millions of dollars they will take the opportunity to continue adjusting their user interfaces to create a more transparent internet.
Student Bio: Alex Samaei is a 2L at Suffolk University Law School. He is currently a staff member of The Journal of High Technology. Alex holds a B.S. in Industrial & Systems Engineering from the University of Florida.
Disclaimer: The views expressed in this blog are the views of the author alone and do not represent the views of JHTL or Suffolk University Law School.
