Apple to Refund App Store Purchases Made Without Parental Consent

Apple to Refund App Store Purchases Made Without Parental Consent

An agreement between federal regulators and Apple may make parents wince a little less at the sight of their children staring at an iPhone.

The Federal Trade Commission said on Wednesday that Apple had agreed to better ensure parental approval of purchases from the company’s App Store. In addition, Apple will pay at least $32.5 million in refunds to customers whose children made purchases without adequate parental consent.

Apple settled a class-action lawsuit last year over unauthorized purchases within apps — transactions that 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. The company said in an email to employees on Wednesday that it had received 37,000 claims.

But the F.T.C. said that similar activity had continued long after the class-action settlement. In a consent decree that now must be approved by a federal court, Apple agreed to modify its practices.

“We allege that Apple has been aware of the issue since at least March of 2011,” said Edith Ramirez, the F.T.C. chairwoman. “In our view the problem continues and it needs to be rectified.” Apple faces a March 31 deadline to notify consumers about the refunds and to make other changes.

At one time, after a user bought an app, there was a 15-minute window to download other products without having to enter a password. This meant that children with Apple devices had 15 minutes after their parents bought an app to buy goods in the App Store or within apps.

With a software update to its mobile devices in 2011, Apple began requiring users to re-enter passwords when trying to make a purchase within an app, even if the app was opened within 15 minutes of buying an app on iTunes. Once the password is re-entered, though, users have another 15 minutes to buy in-app items before they’re forced to enter their password again. There are also controls in iOS, Apple’s mobile operating system, that give parents more finely tuned controls over in-app purchases and the ability to shut them off.

The F.T.C. said on Wednesday that Apple needed to be clearer to consumers when other purchases can be made within 15 minutes. The F.T.C. also said Apple must give consumers a choice when they buy an app about whether to accept the 15-minute window for in-app purchases, as well as the ability to withdraw their approval.

In an email to Apple employees on Wednesday, Timothy D. Cook, the Apple chief executive, said that he did not see a reason for the government to go after Apple since it had already agreed to settle the issue with consumers.

Mr. Cook said the agreement with the F.T.C. did “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.”

Apple’s App Store for iPhones and iPads became successful largely because it made the process of buying software as simple as the tap of a button. Customers spent $10 billion last year in the App Store.

In April 2011, a group of parents filed a class-action lawsuit against Apple concerning what they called “bait apps” — apps that were free to download but included their own ministores to buy goods. Apple and the plaintiffs in the lawsuit agreed to a settlement last year.

The business strategy for so-called bait apps is called freemium, as in free meets premium. In mobile app stores, freemium apps now generate more revenue than apps that charge up front, according to Flurry, an app analytics company.

Steve Dowling, an Apple spokesman, said the company intended to comply with the F.T.C.

“Protecting children has been a top priority for the App Store from the very beginning, and Apple is proud to have set the gold standard for online stores by making the App Store a safe place for customers of all ages,” Mr. Dowling said. “Today’s agreement with the F.T.C. extends our existing refund program for in-app purchases which may have been made without a parent’s permission.”

According to the F.T.C., one consumer said her daughter had spent $2,600 in the app “Tap Pet Hotel,” and other consumers reported unauthorized purchases by children of more than $500 in the apps “Dragon Story” and “Tiny Zoo Friends.”

The consent decree signed with the F.T.C. requires Apple to pay at least $32.5 million; if the refunds total less, the remainder goes to the F.T.C. There is no upper limit on the amount of refunds for which Apple is liable.

Ms. Ramirez said the F.T.C. believed its settlement was “more robust” and more thorough than the lawsuit settlement, in that it requires Apple to modify its conduct.


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