Apple Repays Parents $32.5 Million in In-App Purchases

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Apple is repaying parents $32.5 million in in-app purchases, thanks to a Federal Trade Commission (FTC) ruling.  The filed complaint argued that there had been millions that parents had unwittingly paid out due to in-app purchases made by their children.

The ruling by the FTC comes on the heels of the settlement of last year’s class-action lawsuit against Apple, alleging that millions in in-app purchases had been made by children without adequate parental consent.  In-app purchases are those that can be made up to 15 minutes after an app is downloaded without any further need for passwords or usernames.

What wasn’t clear to many families was that after the parent would enter a password, allowing the child to download a game of their choice, a 15-minute window would open up where in-app purchases could be made without further need of a password being entered.  One instance saw a parent being hit with a $2,600 bill due to her daughter playing “Tap Pet Hotel” and another receiving a $500 bill from her kids playing “Tiny Zoo Friends” and “Dragon Story.”

The FTC said Apple had known about the issue since March 2011, but had not taken action to correct it.  FTC Chairwoman Edith Ramirez said that consumers shouldn’t be expected to sacrifice basic protection and added that the $32.5 million figure was just a starting point.  She said that consumers could be expected to be refunded the entire cost of any in-app purchases that occurred since March 2011 without their consent.

Apple said Wednesday the company had received some 37,000 in claims.  The company has until March 31, 2014 to notify consumers of any refunds.  This is not the first time the Cupertino, California-based company has had run-ins with the government, however; the Senate has released a report criticizing the company for policies that are in place that allow Apple to avoid paying billions in taxes and a court-appointed monitor has been put in place to ensure Apple’s compliance with the antitrust lawsuit it lost last year over e-book sales.

As Apple repays parents $32.5 million in in-app purchases, Chief Executive Officer Tim Cook has come out and said in a statement that the FTC ruling has done little to change Apple’s daily operations.  He noted that the company has already reached out to families and said they would offer refunds for in-app purchases that may have been made without parental consent.

Jeff Chester, executive director of the Center for Digital Democracy based in Washington, DC, said that the FTC ruling doesn’t just affect Apple, but the entire industry.  He noted that the mobile industry is now in a position where it’s being watched, and that government intervention could be possible whenever a problem is perceived.

While the $32.5 million figure may seem significant for many, it’s truly a tiny amount for the tech juggernaut.  Last year, Apple notched $171 billion in revenue, or $19.5 million an hour, a staggering amount.  In addition, at one point it was highly publicized that Apple had more in its coffers than the U.S. government itself.

Apple’s repayment of $32.5 million to parents will definitely not leave the company impoverished, but the warning shot has been given to the tech industry as a whole.

By Christina St-Jean

Sources:

Bloomberg.com

The New York Times

Los Angeles Times

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