Apple to Refund $32.5M to Parents Whose Kids Bought In-App Goodies Without Consent

Settlement comes from Federal Trade Commission case that also demanded changes to Apple’s disclosure policies

Last Updated: July 10, 2014 @ 7:19 PM

Apple has agreed to refund at least $32.5 million to parents and change its policies after complaints that children were purchasing in-app goodies — thousands of dollars worth, in some cases — without their parents’ consent, the Federal Trade Commission said Wednesday. 

“This settlement is a victory for consumers harmed by Apple’s unfair billing, and a signal to the business community: whether you’re doing business in the mobile arena or the mall down the street, fundamental consumer protections apply,” FTC Chairman Edith Ramirez said. “You cannot charge consumers for purchases they did not authorize.”

A number of kids app games feature the ability to buy virtual items for fees ranging from 99 cents to $99.99. Those purchases require parents to enter a password — often an itunes password. What they didn’t know was that action opened a 15-minute window when additional purchases could be made.

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The FTC also said many games invited children to obtain virtual items without making clear that real money was being exchanged. One such example the FTC pointed to was “Dragon Story,” in which children hatch, raise, and breed virtual dragons using “gold” that costs real money to obtain dragon-sustaining “coins” and “food.”

The FTC said Apple had received tens of thousands of complaints about the charges, and that several parents reported their children racked up more than $500 in charges in two days; one cited more than $2,600 of charges.

Apple had previously settled a class-action case concerning in-app charges on kids games, but the FTC acted anyway — in part to force Apple to alter its disclosures and not cap refunds to parents. The company agreed in its settlement with the FTC to pay a minimum of $32.5 million; if refunds fail to meet that number, Apple will pay the balance to the government.

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In a note to employees, Apple CEO Tim Cook said the company settled because the FTC was asking for actions the company was already implementing as a result of the class-action settlement.

“It doesn’t feel right for the FTC to sue over a case that had already been settled. 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,” he wrote.