Apple agrees to refund users in FTC settlement over unwanted in-app purchases

By , Jan 15, 2014

iOS in-app purchase (teaser)

Parents whose kids were tricked into obtaining virtual items in iPhone and iPad games by way of the iOS In-App Purchase mechanism will get refunded over unwanted spending, according to Apple’s settlement with the U.S. Federal Trade Commission (FTC). The penalty dwarfs Google’s $22.5 million fine in the Safari website tracking scandal.

Apple CEO Tim Cook was not pleased with the outcome, but acknowledged in a letter to employees that the company “has entered into a consent decree” over long-standing complaints over inappropriate charges in the App Store, alluding his company may have exhausted its legal options and didn’t want to risk an enduring legal battle with the government…

According to a statement on the FTC’s website, kids’ in-app purchases without parental consent will cost Apple a minimum of $32.5 million. The terms of the settlement with the FTC call for Apple to change how it bills consumers to ensure that it has obtained “express, informed consent from consumers before charging them for items sold in mobile apps”.

Apple should have made it much clearer to parents that entering their Apple ID credentials for a single in-app purchase also allowed the system to approve subsequent in-app charges during a 15-minute password cut off window.

App Store (in-app purchases section 002)

Once parents entered their password, kids would simply continue buying virtual items in games, not realizing the iTunes backend billed their parents’ credit card for each subsequent purchase made within an app.

Cook, on the other hand, thinks that “it doesn’t feel right for the FTC to sue over a case that had already been settled“. His memo to employees lists a few changes Apple had implemented to prevent unwanted charges in apps.

Those would be deploying a new iOS Restrictions switch to disable in-app purchases altogether, creating a special App Store section detailing the feature and reaching out the 28 million App Store customers who had made an in-app purchase in a game designed for kids and “reimbursing each one as promised” (with iTunes credits).

Here’s how easy it used to be to racket up a cool $100 prior to these changes.

Re/code has the full text of Cook’s memo to troops:

From: Tim Cook
Date: January 15, 2014
Subject: FTC announcement

Team,

I want to let you know that Apple has entered into a consent decree with the U.S. Federal Trade Commission. We have been negotiating with the FTC for several months over disclosures about the in-app purchase feature of the App Store, because younger customers have sometimes been able to make purchases without their parents’ consent. I know this announcement will come as a surprise to many of you since Apple has led the industry by making the App Store a safe place for customers of all ages.

From the very beginning, protecting children has been a top priority for the App Store team and everyone at Apple. The store is thoughtfully curated, and we hold app developers to Apple’s own high standards of security, privacy, usefulness and decency, among others. The parental controls in iOS are strong, intuitive and customizable, and we’ve continued to add ways for parents to protect their children. These controls go far beyond the features of other mobile device and OS makers, most of whom don’t even review the apps they sell to children.

When we introduced in-app purchases in 2009, we proactively offered parents a way to disable the function with a single switch. When in-app purchases were enabled and a password was entered to download an app, the App Store allowed purchases for 15 minutes without requiring a password. The 15-minute window had been there since the launch of the App Store in 2008 and was aimed at making the App Store easy to use, but some younger customers discovered that it also allowed them to make in-app purchases without a parent’s approval.

We heard from some customers with children that it was too easy to make in-app purchases, so we moved quickly to make improvements. We even created additional steps in the purchasing process, because these steps are so helpful to parents.

Last year, we set out to refund any in-app purchase which may have been made without a parent’s permission. We wanted to reach every customer who might have been affected, so we sent emails to 28 million App Store customers – anyone who had made an in-app purchase in a game designed for kids. When some emails bounced, we mailed the parents postcards. In all, we received 37,000 claims and we will be reimbursing each one as promised.

A federal judge agreed with our actions as a full settlement and we felt we had made things right for everyone. Then, the FTC got involved and we faced the prospect of a second lawsuit over the very same issue.

It doesn’t feel right for the FTC to sue over a case that had already been settled. To us, it smacked of double jeopardy. However, the consent decree the FTC proposed does not require us to do anything we weren’t already going to do, so we decided to accept it rather than take on a long and distracting legal fight.

The App Store is one of Apple’s most important innovations, and it’s wildly popular with our customers around the world because they know they can trust Apple. You and your coworkers have helped Apple earn that trust, which we value and respect above all else.

Apple is a company full of disruptive ideas and innovative people, who are also committed to upholding the highest moral, legal and ethical standards in everything we do. As I’ve said before, we believe technology can serve humankind’s deepest values and highest aspirations. As Apple continues to grow, there will inevitably be scrutiny and criticism along our journey. We don’t shy away from these kinds of questions, because we are confident in the integrity of our company and our coworkers.

Thank you for the hard work you do to delight our customers, and for showing them at every turn that Apple is worthy of their trust.

Tim

FTC Chairwoman Edith Ramirez called the settlement a win for consumers and a blow to Apple because “you cannot charge consumers for purchases they did not authorize”.

The FTC said in a statement it will announce the settlement later today.

The UK government is also conducting a probe into iOS in-app game purchases.

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  • ★LEA – MILEY – DEMI★

    Just use restrictions!

    • http://www.idownloadblog.com/author/dujkan Christian Zibreg

      There were no restrictions in place back when this had happened.

      • Ignacio Irigoyen

        You could always log out of the itunes account.
        inconvinient? Yes, but still an option

      • William Vejdal

        And u r able 2 turn “in-app purchases” of in settings stock app…

  • Dev Shah

    Actually the developers have become greedy nowadays due to these “In-App Purchases”, I would prefer a Paid app instead of Freemium Apps.
    E.g .- Difference between Asphalt 8 & Asphalt 7.!

    • http://ecelltech.blogspot.com/ e_cell

      Totally agree. Plus, you get to ditch all the annoying ads on-screen.

  • Framboogle

    SOLUTION: just use LocalIAPstore

    • John Merkowsky

      I love you. Yes, all the yes.

    • William Vejdal

      Try iapfree (standalone) it has more apps to cheat on and it’s compatible with iOS 7 (as localiappstore)

      • Framboogle

        Wow this one is actually better. Thanks!

    • Dani Hayes

      Flex is also a viable option.

  • Ignacio Irigoyen

    This is ridiculous, Apple is getting punishment just to parents don’t have to teach their children o pay them any atention.

    • http://www.idownloadblog.com/author/dujkan Christian Zibreg

      I’m with the FTC. Back then, there was no Settings switch to disable those in-app purchases. So your daughter comes asking you to type in your Apple ID password so she could buy a virtual hat in a Barbie game, for 99 cents. What do you do, show her the door?

      And once you typed in that password, she could buy anything she wanted because there was no password prompt for subsequent purchases during the 15-minute window.

      On top of that, Apple failed to communicate how in-app purchases work, especially the 15-minute thing.

      • Ignacio Irigoyen

        While your point is a valid one, as I said it is the responsability of the parent to teach their children, you should be resonsable for giving something to your kids and if they missuse this.

        I agree more safe guards are where needed in the day, I think Apple is the target of a standar that now other companie is not obligated to follow.

        In the US anyone can sue a companie just becouse the did something that was not in the “manual” and something when wrong?

      • Terri

        Thank you for that comment Christian. Yes, as a parent, you should be aware, but they also required at that time that you have a credit card or checking account tied to the account. I now only use I tunes cards.

  • Laszlo Gaspar

    Hmmm, its tricky, too much security and people get annoyed, too little and money gets spent accidentally.

  • Terri

    There were no restrictions in place when my son racked up $700 in charges on Smurfs Village 2 years ago. They also made you attach your ITunes account to a credit card or bank account. When I tried to get a refund, I tried to contact customer service via through apple, again, no one would talk to me, They also made it extremely difficult to contact them in the first place. I would like my money back. I had to learn the hard way that my son could not have access to the internet, when I was at work, even with adult supervision from others.

    • Terri

      I would like my money back.

  • BozzyB

    This 15 minutes range is critical. Androids solution is that you have to enter the password to buy something. Also especially for kids (or other family members) you can use a separate account on tablets because it has mutliuser support. Then you can purchase apps from your account. The kids can’t buy, change, delete anything (your emails etc.).