Amazon prepared to fight FTC over in-app purchases dispute

Amazon (NASDAQ: AMZN) said it is prepared to go to court with the Federal Trade Commission rather than submit to increased oversight and other measures the FTC says are needed to ensure children do not make unauthorized in-app purchases from apps in Amazon's Appstore.

The FTC is charging in a draft lawsuit released by Amazon that unauthorized charges by kids using Amazon's Kindle Fire tablets have totaled up to millions of dollars, according to the AP.

Amazon responded in letter Tuesday to FTC Chairwoman Edith Ramirez that it had already refunded money to parents who complained. Amazon said it would rather fight the lawsuit than agree to fines and additional record-keeping and disclosure requirements over the next 20 years.

The FTC wants the online retail giant to submit to terms similar to ones that Apple (NASDAQ: AAPL) agreed to over in-app purchases in January. The FTC imposed a $32.5 million fine on Apple to settle charges that the company didn't do enough to prevent children from purchasing virtual goods within apps without getting consent from parents.

Amazon said its parental controls go beyond what the FTC required from Apple. "When customers told us their kids had made purchases they didn't want, we refunded those purchases," wrote Andrew DeVore, an Amazon associate general counsel, in the letter to the FTC. He said Amazon's Appstore included "prominent notice of in-app purchasing, effective parental controls and real-time notice of every in-app purchase."

Amazon's Kindle Free Time app can limit how much time children spend on Kindle tablets and it can also require a PIN code for in-app purchases, Amazon spokesman Craig Berman told the AP.

"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," DeVore wrote.

However, the FTC said Amazon would need to make the notices more prominent, require passwords for all in-app purchases and make refunds simpler and easier, according to the Wall Street Journal. The agency also wants Amazon to refund customers, give up any profits from inappropriate activity and to compensate for the FTC's costs. The FTC also alleges that Amazon did not require customers' informed consent for all in-app purchases on the latest models of its devices until June.

"The commission 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," an FTC spokesman told the Journal. "Consumers using mobile devices have the same long-established and fundamental consumer protections as they would anywhere else."

Amazon's Appstore is likely to grow in importance for the company, which is releasing its first smartphone, the Fire, later this month. Amazon will need the support of developers to grow the number of apps and games in the store, which now number around 240,000. Further, BlackBerry (NASDAQ:BBRY) recently announced a deal to gain access to Amazon's Appstore for its BlackBerry 10 phones.

Amazon is the second company this week to tussle with the FTC. The agency sued T-Mobile over premium SMS charges the carrier levied against customers for third-party content purchases. T-Mobile has called the lawsuit "unfounded and without merit."

For more:
- see this WSJ article (sub. req.)
- see this AP article
- see this Reuters article
- see this CNET article

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