FTC Orders Apple to Pay a Minimum of $32.5 Million Over In-App Purchases

The tech company agreed to refund parents whose children made in-app purchases without their knowledge.

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By Laura Entis

Opinions expressed by Entrepreneur contributors are their own.

Imagine that your child racked up thousands in app purchases without your consent or knowledge. That's exactly what happened to one consumer whose daughter, unbeknownst to her, spent $2,600 in the app "Tap Pet Hotel." And she isn't the only one. Other parents are stepping forward with reports of unauthorized purchases by their children, some totaling more than $500 in kid-friendly apps like "Dragon Story" and "Tiny Zoo Friends."

Parents aren't the only ones feeling the repercussions. Apple is too.

On Wednesday, Apple reached a settlement with the FTC agreeing to refund at least $32.5 million to parents whose children made unauthorized in-app purchases. The tech company, the FTC charged, had made it too easy for children using kid-focused apps to rack up substantial bills.

Related: In Patent War, Apple and Samsung to Try Mediation Before March Court Date

This is not a new issue for Apple. Last year, the company settled a class-action lawsuit over kids' in-app spending. The case centered on the fact that transactions could be made within 15 minutes of buying an app from Apple without having to provide an additional password or authorization. As part of the settlement, Apple offered refunds to consumers who were affected. It received more than 37,000 claims.

But the FTC now says unauthorized purchases didn't stop with the class-action settlement. It has ordered Apple to modify its billing practices for mobile apps by making sure it obtains express consent from consumers before charging them.

"It doesn't feel right for the FTC to sue over a case that had already been settled," Tim Cook wrote in a companywide letter posted by 9to5mac. "To us, it smacked of double jeopardy. However, the consent decree the FTC proposed does not require us to do anything we weren't already going to do, so we decided to accept it rather than take on a long and distracting legal fight."

Related: Apple and the Kid App Maker Revolution

Laura Entis
Laura Entis is a reporter for Fortune.com's Venture section.

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