Apple to refund at least $32.5M in FTC settlement

Apple to refund at least $32.5M in FTC settlement

Summary: Apple CEO Tim Cook said in a letter to staff that despite a federal judge siding with the company, the case was settled with the FTC to avoid a "long and distracting legal fight."

TOPICS: Government US
(Image: FTC)

Apple has settled a long-standing case with the U.S. Federal Trade Commission over in-app purchases.

According to a letter obtained by Recode, the consent decree entered into by the Cupertino, Calif.-based technology giant and the government agency does not force Apple to "do anything we weren’t already going to do," according to Apple chief executive Tim Cook.

However, the FTC said in a statement that Apple will pay back a minimum $32.5 million to customers affected by the complaint. The agency said the figure was drawn up to consider "full consumer redress."

Apple will also be required to change billing practices to ensure that "express, informed consent" is received before a purchase is made. 

The iPhone and iPad maker must make these changes by no later than March 31, the FTC said.

The FTC's complained alleged Apple did not inform its smartphone and tablet owners that entering their password will open a 15-minute period in which children can incur "unlimited charges" with no further adult supervisory intervention.

FTC representatives claimed Apple's in-app purchases fell foul of the law by failing to tell customers that entering a password to authorize the buy would incur additional charges.

The vote to accept the consent agreement was made by a 3-1 in favor ruling.

An Apple spokesperson said in a statement (via sister-site CNET) that protecting children has been a "top priority" for the App Store from the very beginning, adding: "Today's agreement with the FTC extends our existing refund program for in-app purchases which may have been made without a parent's permission."

Citing a case where a federal judge fell on the company's side, Cook called the FTC's move to sue after the ruling that had already been settled as being "smacked of double jeopardy."

Apple decided to accept the FTC's offer to settle after months of negotiation, he said, "rather than take on a long and distracting legal fight," Cook wrote.

Since 2013, Apple said it set out to refund any purchase, such as a game add-on or a premium ad-removal feature, within existing apps that may have been made without a parent's permission.

The company said it sent an email to 28 million App Store customers who may have been affected by this, but went further to say: "When some emails bounced, we mailed the parents postcards. In all, we received 37,000 claims and we will be reimbursing each one as promised," Cook wrote.

Updated at 1:55 p.m. ET: with Apple statement.

Topic: Government US

Kick off your day with ZDNet's daily email newsletter. It's the freshest tech news and opinion, served hot. Get it.


Log in or register to join the discussion
    • You know

      That posting this twice does not make it true there TIMMAY.

      The fact is that we should not have to legislate common sense - and the entire lawsuit was bogus. honestly what kind of moron does not realize that unlocking the phone gives full access? However the FACT that Apple has not only fixed the issue by having the customer have to enter a password for an in-app purchase and is and was willing to make redress must stick in your Apple-hating craw.

      So how much was Ballmer paying you?
      • Must be a lot of 'fools' then... apart from you obviously.

        Funny... When I get told to do something I sometimes act like a kid and say I was going to do it anyway. Course I wasn't, not till I was told. If Apple was 'going to do it anyway' they'd have grabbed the opportunity to shine and show the world how they were supportive of the folk who were CLEARLY AND UTTERLY RIPPED OFF. I know of some affected, but luckily not me. None were stupid, or fools, or in any way lax with security. These games cleverly presented the opportunity for folk to 'get enhanced gameplay etc' but found clever ways to HIDE the fact it was costing hard cash from everyone. This is a victory for common sense and I just wish it now dictates that all purchases are clearly labelled in dollars. We all understand them!

        ps I don't hate Apple... just the ethos :-)
      • You say common sense. But how about a user manual..? Is this that too hard

        Apple doesn't include manuals with their iPhones, iPads, iDevices. What you get is a "Legal Terms & Conditions" and licensing paperwork.

        How is a regular person supposed to know, without reading a MANUAL, that for 15 minutes their bank account could be drained..?

        Apple is pretty fishy with telling the truth; in fact they hide it..!
        • You're wrong

          In fact,you get a user manual with your new iDevice or Mac. Does ANY smartphone/tablet has a user Manual, where is written that in app purchases are not different from any other purchases, no matter whether it made by kid or adult? Name one, please.
          Maria Davidenko
          • Tell me where in ANY Apple Manual

            where it shows you how to create an Apple ID with no payment option.
  • Please stop

    Apple suing, or getting sued, is so common you could fill the entire website with columns. How about some tech news?
    Sean Foley
    • Apple, a tech firm, is at fault...

      Reporting on the business of tech (including legal questions of law) is very helpful for parents to make a determination if their family and funds are safe.

      Apple doesn't provide user manuals, which disclose hardware functionality. If they did, then they probably would have told people how it works.

      It seems your an Apple Apologist. That's OK. But, not everyone is. As an Apple Apologist, does everything have to be a surprise to you?
      • Hardware functionality????

        Actually, Apple provides a manual , that you've mentioned. But in app purchase is a software functionality. Do you really think that every hardware vendor should provide such description and could you name a vendor, which provides such a manual along with its products?
        Maria Davidenko
    • This signals a larger problem with the app store

      This problem is one more sign that the app store model is broken and Apple needs to work on a new design sooner rather than later. My response to this article here
  • I'll say it again

    The feds shouldn't be allowed to settle lawsuits against private parties, unless the defendants agree with the feds as to what illegal acts were actually committed, and the proposed settlement is logically calculated to address those illegal acts.

    As it stands, it's too easy for a defendant such as Apple to claim, in effect, to have been the innocent victim of blackmail.
    John L. Ries
  • Complete BS

    These "kids" that are purchasing apps and whatnot, they know what they are doing, or at least have an idea of what they are doing. They know they are downloading something and this is not something they should be doing. Where are the parents in all this? So the kids can do whatever they please and not have any penalties? That's a bunch of horse hockey. Someone needs to stand up and show some backbone here.

    For any app that is purchased you must tap on: "Buy" or "Download". Don't tell me these kids can't read or see this.

    By the way, I knew that there was a 15minute open window to download anything after you input your password. At first I figured it out just from downloading apps randomly, sometimes I had to input my password, sometimes I didn't. I read it somewhere, can't remember.

    So what is the solution to this? Input the password each and every freaking time you have to download an app? This is ridiculous. Apple is as guilty as McDonald's for that customer who spilled hot coffee on her lap.
  • Deceptive practices

    ... are at the bottom of this. Interesting how a number of folks quickly jump to blaming the parents for not 'controlling their kids' or not 'reading the manual'. I'm convinced these are trolls that are here to create confusion by blaming the victims; not unlike we have seen with other issues like sub prime mortgages and many other examples. There is a reason why the law covers fraud and deceptive practices; I do believe this was the case with not all, but many developers that took advantage of the situation. My comments on the business side of this here
    • Apple started the deceptive practice of

      removing the no-payment option from the Apple ID sign up screen.
      Little Johnny gets an iPod Touch for christmas and runs to Mummy for a credit card number because a payment method is "REQUIRED" on the sign-up page. So mummy has to comply and there is no obvious way around this.
      This is mal-practice on Apple's part. They offer a work around so that you can sign-up with no payment option but it's not available on the sign-up page by idevices or itunes in the initial setup.