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Apple Settles Complaint Over Children’s Apps for $32.5 Million

By Sean Cavanagh — January 15, 2014 2 min read
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Silicon Valley technology giant Apple Inc. has agreed to refund customers at least $32.5 million as part of a settlement, according to federal officials, who had accused the company of improperly charging families for items sold in mobile apps for children.

The Federal Trade Commission, an agency focused on consumer protection, alleged that Apple improperly allowed children to incur charges through apps without the necessary parental consent.

As part of the agreement, Apple has agreed to provide full refunds to consumers, and alter its billing system and guarantee that it has secured “express, informed consent” before applying charges through mobile apps, the FTC said in a statement issued Wednesday.

What charges were the feds concerned about?

The FTC said that apps for children in Apple’s online store have allowed users to take on charges, either through “virtual items or currency used in playing a game.” Charges typically ranged from 99 cents to up to $99.99 per in-app charge, the commission said.

The FTC says Apple did not tell account holders that entering a password would allow for a window in which children could be charged a potentially unlimited amount. In some cases, screens have appeared that prompted parents to enter their passwords, without explaining that doing so would finalize a purchase, the agency said.

Those practices violate federal law, the commission asserted in its initial complaint—specifically the FTC Act.

The agency’s complaint cites an example of a parent discovering $2,600 in charges on a credit card as a result of a child using an app called the “Tap Pet Hotel.”

In another instance, a woman’s niece accumulated a $113.46 bill playing an app, “Racing Penguin, Flying Free.” According to the adult, the girl did not know her password through iTunes, but racked up charges during a 15-minute window when Apple does not prompt account holders to provide a password.

The FTC says it is placing a greater emphasis on protecting consumers who are using mobile technologies. The settlement also comes as privacy advocates have raised concerns about the commitment of technology companies and school officials to safeguarding student data. (In 2012, the FTC strongly criticized the practices of app developers and third parties in a report that concluded that some companies were collecting personal information from children and families without their consent.)

The agreement with Apple soon be subject to public comment for 30 days, and after that the FTC will decide whether to make it final.

The commission voted to accept the agreement by a margin of 3-1. Commissioner Joshua D. Wright dissented. Wright wrote that Apple’s alleged trangressions affected an “extremely small—and arguably, diminishing—subset of consumers.”

“The commission, under the rubric of ‘unfair acts and practices,’ substitutes its own judgment for a private firm’s decisions as to how to design its product to satisfy as many users as possible, and requires a company to revamp an otherwise indisputably legitimate business practice,” Wright argued.

“Given the apparent benefits to some consumers and to competition from Apple’s allegedly unfair practices,” he added, “I believe the commission should have conducted a much more robust analysis to determine whether the injury to this small group of consumers justifies the finding of unfairness and the imposition of a remedy.”

A version of this news article first appeared in the Digital Education blog.