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 Amazon, the largest U.S. online retailer, faces a potential lawsuit
from the Federal Trade Commission, which wants the company to enter
into a settlement similar to the one reached with rival Apple Inc in
January.
At issue are in-app purchases, in which apps that are downloaded for
free onto a smartphone or tablet then charge users for additional
services through registered credit cards. Consumers say that
children are susceptible to the practice, leading to large bills.
In a draft complaint, the FTC said there have been thousands of
complaints related to millions of dollars in unauthorized in-app
charges by children on Amazon devices. The agency said Amazon only
changed its in-app charging policies last month.
Amazon, which has built a rapidly growing business around its Kindle
mobile devices and last month unveiled its own smartphone, said in a
letter to the FTC it has already met or exceeded the requirements of
Apple's terms.
"The commission's unwillingness to depart from the precedent it set
with Apple despite our very different facts leaves us no choice but
to defend our approach in court," Andrew DeVore, an Amazon associate
general counsel, said in the July 1 letter.
Purchases of digital goods -- from extra game lives to special
in-game tools -- are key to the success of tech companies' app
stores, which in turn drive usage and mobile device sales.
In January, Apple agreed to refund customers at least $32.5 million
and change its billing practices to ensure it obtains consent from
parents before charging for in-app spending.
The FTC is pushing Amazon to refund customers, give up any profits
from inappropriate activity and to compensate for the FTC's costs.
Many parents who discover the charges and want a refund face
"significant hurdles to doing so," the FTC said in a draft of its
complaint, adding that the process remains unclear, confusing and
without clear instructions for obtaining a refund.
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Amazon said it was "deeply disappointing" that weeks of negotiations
failed to sway regulators.
In its letter, Amazon said it refunded customers who complained that
their children made purchases they did not want. The letter said
Amazon's app store included "prominent notice of in-app purchasing,
effective parental controls and real-time notice of every in-app
purchase."
The FTC declined to comment, saying it "is focused on ensuring that
companies comply with the fundamental principle that consumers
should not be made to pay for something they did not authorize."
"Consumers using mobile devices have the same long-established and
fundamental consumer protections as they would anywhere else," the
FTC said.
The Wall Street Journal first reported the news. The Journal
reported that the FTC said Amazon would need to make notices of
in-app purchases more prominent, require passwords for all purchases
and make refunds simpler and easier.
(Additional reporting by Diane Bartz in Washington, D.C.; Editing by
Leslie Adler)
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