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."

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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.

Topics: Government : US

About

Zack Whittaker writes for ZDNet, CNET, and CBS News. He is based in New York City.

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