FTC sues Amazon over children's in-app charges made without parental consent

UPDATED: The FTC alleges that the in-app charges debate has been an internal struggle at Amazon for some time now, citing internal company emails referring to the situation as a "house on fire."
Written by Rachel King, Contributor

Amazon is having a big morning for its app developers, but not everything is welcome news for the Internet giant.

The Federal Trade Commission filed a lawsuit against the Seattle-based corporation, alleging that Amazon wrongfully and illegally billed parents for their children's unauthorized in-app charges. The FTC estimated these charges are worth "millions of dollars."

The lawsuit cites that Amazon retails at least 30 percent of the proceeds from all in-app charges stemming from the Amazon Appstore.

After compiling together complaints from "thousands of parents," here is one case included in the lawsuit:

For example, one mother noted in the FTC complaint told Amazon that her daughter was able to rack up $358.42 in unauthorized charges, while others complained that even children who could not read were able to “click a lot of buttons at random” and incur several unauthorized charges.

FTC chairwoman Edith Ramirez argued further in prepared remarks, suggesting the gap between parental knowledge and children's actions on devices such as the Kindle Fire was internally referred to at Amazon as a "House on Fire" situation.

“Even Amazon's own employees recognized the serious problem its process created," Ramirez remarked, "We are seeking refunds for affected parents and a court order to ensure that Amazon gets parents' consent for in-app purchases."

Amazon has made some moves to obtain cardholder consent on newer devices in the last year, and there are tips for turning off in-app purchasing from the Appstore.

But at this time, the retail behemoth's company policy is that all in-app charges are final and nonrefundable.

The FTC is seeking to change that -- much like the legal battle it underwent against Apple and similar charges made on apps sold through iTunes. In January, Apple agreed to refund at least $32.5 million to customers included in the complaint.

ZDNet has reached out to Amazon for comment, and we will update this post once we hear back.

UPDATE: Amazon stood by its response to the FTC penned last week by Andrew DeVore, vice president and assistant general counsel at Amazon. That letter is available in full below:

Amazon's Response to FTC

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