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DMA, Others Respond to FTC-Amazon Suit

16 Jul, 2014 By: Doug McPherson

WASHINGTON – The Federal Trade Commission (FTC) hit Amazon with a lawsuit last week, accusing it of letting children run up charges on their parents’ credit cards through in-app purchases.

The FTC wants the court to require Amazon to reimburse parents and permanently ban Amazon from billing parents and other accountholders without their consent. The agency says thousands of consumers have complained about the charges, amounting to millions of dollars in unauthorized transactions.

“Parents and other Amazon account holders have suffered significant monetary injury, with thousands of consumers complaining about unauthorized in-app charges by their children, and many consumers reporting up to hundreds of dollars in such charges,” the FTC alleges in its complaint, filed in U.S. District Court in the Western District of Washington.

In response to the news, the Direct Marketing Association’s (DMA) vice president of government affairs, Peggy Hudson, issued this statement: “The Federal Trade Commission should be encouraging innovation in the growing mobile industry, which benefits consumers and competition. Instead, the Commission seems focused on using novel legal theories and scarce enforcement resources to go after America’s leading tech companies in court. Amazon reportedly has already done the right thing by enhancing its app market and providing consumer refunds, so consumers have nothing to gain and plenty to lose from the Commission’s lawsuit. Nothing will discourage future innovation faster than punishing good deeds.”

The advocacy group Center for Digital Democracy cheered the FTC’s move. “Amazon’s policies of making it simple for children to accidentally spend hundreds of dollars in a ‘kids’ app ... are irresponsible and unfair,” the group said in a statement.

Mark Walsh, a reporter for MediaPost News, says Amazon can learn from Apple. Earlier this year, Apple agreed to provide refunds of at least $32.5 million to settle similar allegations.

“You have to wonder why Amazon hasn’t already settled,” Walsh writes. “Is this really the kind of fight the company wants as it prepares to launch its own smartphone that it hopes to serve as a shopping machine people carry around in their pockets?”

Walsh adds that Apple, too, is not known for shying away from litigation. Its 2011 lawsuit to stop Amazon from using the term app store on trademark grounds was denied by a federal judge. But Amazon has said in a letter to the FTC that it already meets the requirements of the Apple consent order, according to a Wall Street Journal article.

The FTC alleges Amazon began receiving complaints from parents about in-app charges nearly as soon as Amazon began allowing them. In March 2012, Amazon began requiring people to enter a password for in-app purchases of more than $20. Many apps let people make purchases in much smaller increments. The following year, Amazon began requiring passwords to confirm in-app purchases, but didn’t consistently do so, according to the FTC.

The agency says Amazon changed its policies last month, and now gets people’s “informed consent” for in-app purchases made on new mobile devices.

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