US regulators to Amazon: Refund customers for unauthorized charges

The Federal Trade Commission filed a lawsuit on Thursday alleging that online mega retailer Amazon had taken in millions of dollars through in-app purchases made by kids using the credit card information of their unknowing parents. 

REUTERS/Rick Wilking/Files
A box from Amazon.com is pictured on the porch of a house in Golden, Colorado in this July 23, 2008, file photo.

The U.S. government sued Amazon.com on Thursday for allowing children to collectively run up millions of dollars in purchases on the credit cards of their unsuspecting parents while playing mobile apps like "Tap Zoo" and "Ice Age Village."

The lawsuit, filed by the Federal Trade Commission, seeks to make the online retailer refund money spent without parental permission and to end Amazon's practice of allowing purchases without requiring a password or other mechanism that gives parents control over their accounts.

The unauthorized charges are often associated with children's apps, such as games, that can be free to download but allow players to make in-app purchases by buying "coins" or other digital products with the credit card associated with the device, the FTC said in its complaint.

The FTC complaint cited "Tap Zoo" and "Ice Age Village" in which children manage a zoo or an ancient town. To do that, they can purchase digital items that often cost real money.

A user put a review on Amazon.com in July 2013 complaining that "Tap Zoo" was a "cash trap" and said his son spent $65 on it without permission. The game currently tells parents how to disable the purchasing function.

The apps run on Amazon's Kindle Fire, Kindle Fire HD and devices that use Google's Android operating system.

The FTC settled a similar case with Apple Inc in January. Apple agreed to refund to customers at least $32.5 million in unauthorized charges made by children and to change its billing practices to require consent from parents for in-app spending.

Amazon declined comment, and referred reporters to a letter that its vice president and associate general counsel, Andrew DeVore, wrote to FTC Chairwoman Edith Ramirez dated July 1.

In the letter, DeVore protested the FTC's threat to file a lawsuit against the company if it did not agree to a consent order along the lines of the one reached with Apple in January.

DeVore also said the FTC threat to sue "leaves us no choice but to defend our approach in court."

The FTC said in its lawsuit that Amazon responded to complaints about unauthorized charges by requiring passwords for large purchases in 2012. That was extended to all purchases in 2013, but once a password has been entered, a purchase window remains open for up to an hour, meaning that further charges could be made without parents' knowledge, the complaint said.

The complaint quotes an Amazon official as saying shortly after the program began: "We believe that parents are excluded from the buying process for these apps."

Some parents said their children spent hundreds of dollars without their knowledge, the complaint said. Amazon bills for the in-app purchases and keeps 30 percent of the charges, the complaint added.

Amazon.com shares were down 0.7 percent at $327.48 in afternoon U.S. trading.

(Additional reporting by Deepa Seetharaman; Editing by Ros Krasny, Bill Trott and David Gregorio)

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