In the latest example of the Federal Trade Commission’s intent to insure app store billing practices safeguard against unauthorized charges by children, Google has agreed to refund $19 million and change its mobile app billing practices.
Google is settling with the FTC over the allegations that it unlawfully billed parents for unauthorized in-app charges made by children in order to resolve an issue the company says it has already addressed and to avoid protracted litigation. The settlement follows Amazon’s decision a couple of months ago to fight similar allegations brought against it by the FTC while Apple settled with the agency earlier this year.
“It is clear that the FTC has made a real priority of apps, mobile and kids,” said Jules Polonetsky, executive director at the Future of Privacy Forum, Washington. “So anything that has all three of those together is going to get a real serious scrutiny and there is not a lot of room for mistakes, especially if there is harm to consumers such as unauthorized charges.
“Developers in those spaces really want to mind their Ps and Qs,” he said.
The FTC’s complaint against Google alleges that the company has been engaged in unfair commercial practices since 2011 – when Google first introduced in-app purchases - by billing consumers for charges made by children within kids’ apps downloaded from the Google Play store.
The alleged unauthorized charges amounted to hundreds of dollars for some consumers, according to the complaint.
"We've already made product changes to ensure people have the best Google Play experience possible,” a Google spokesman said. “We're glad to put this matter behind us so we can focus on creating more ways for people to enjoy all the entertainment they love.”
In-app purchases are still a relatively new development in the mobile industry and companies such as Google, Apple and Amazon insist they are working hard to build payment processes that meet the needs of consumers – who do not want to have to repeatedly enter a password – and regulators, who want to protect consumers from unauthorized charges.
The FTC has been focusing on in-app purchases in recognition of the fact that smartphones and tablets have quickly become part of many American families’ daily lives, with children enthusiastically engaging with a growing number of mobile games and other activities.
The FTC’s goal is to remind mobile companies that long-standing consumer protections apply to them, such as that consumers should not be charged for purchases they did not authorize.
The issue with children’s apps is that, in some cases, when users are encouraged to accumulate virtual items to help them advance in a game they are not aware of the difference between virtual money purchases and real money purchases.
The Google complaint alleges that the company billed consumers for many such charges by children without gaining the account holder’s authorization.
The FTC’s settlement with Apple was for $32.5 million in refunds and a change in billing practices.
According to the complaint, in mid- to late 2012, Google began presenting a pop-up box that asked for the account holder’s password before billing in-app charges. However, the pop-up did not contain any information about the charge and users were not made aware that entering the password opened up a 30-minute window in which a password was no longer required. As a result, children were able to rack up unlimited charges during that time.
The settlement will require Google to provide full refunds of unauthorized in-app charges incurred by children and to modify its billing practices to obtain express, informed consent from consumers before billing them for in-app charges.
“The basic principal is the same and the particular facts are in fact different [for the Google, Apple and Amazon complaints],” said FTC Chairwoman Edith Ramirez, in a conference call with the media to discuss the announcement. “We have take each of these cases on its own terms.
“We are looking at this and judging each case by its own set of facts,” she said. “There are similarities, there are certain differences but, at the end of the day, the principal we are trying to insure companies understand, is that no matter the platform, no matter the technology, no matter the new product or service, we want to make sure that consumers are provided with enough information so that they can make meaningful choices before any charges are billed to them.”
Final Take Chantal Tode is senior editor on Mobile Marketer, New York
Associate Editor Chantal Tode covers advertising, messaging, legal/privacy and database/CRM. Reach her at email@example.com.