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Apple Ordered to Pay $32.5 Million to Refund Purchases Made by Children

Apple has been ordered to pay refunds totaling at least $32.5 million for charges billed to United States customers whose children made purchases without their consent.  Apple’s revenue in the last fiscal year was $171 billion.

The settlement also requires that Apple make changes to the way it bills customers so that parental consent is necessary before an application can bill their Apple accounts.  According to the complaint, the technology giant is negligent by not disclosing to its consumers that once a password is entered in the App Store, a 15-minute window of time is opened in which additional purchases can be made without the password or any other intervention from the account holder.  Apple also was found to have violated the federal law regarding unfair business practices by not explaining that the entry of a password would finalize the purchase.

The FTC estimates that children playing games on their parents’ devices charged millions of dollars worth of in-game expenses while playing apps such as “Tiny Zoo Friends” and “Dragon Story.”  Ramirez added the the commission had received “tens of thousand of complaints” from customers of Apple.  The $32.5 million in refunds were ordered only for Apple purchases that were made while playing applications geared toward children from March 2011 to now , but Apple must rewrite the disclosures on all of its applications to be more clear regarding purchases made.

The FTC voted to accept Apple’s settlement 3-1.  The one dissenting Commissioner, Joshua Wright, argued in his “no” vote that there was not sufficient evidence presented to prove that the “extremely small” number of customers harmed by Apple’s non-disclosure was worth deciding that Apple had been unfair.

Apple’s CEO, Tim Cook, sent a memo to employees that cited a $100 million class action suit which had been settled in June to refund unauthorized purchases by children.  In the memo, Cook complained that it feels like “double jeopardy” to be sued by the FTC over a previously-settled case.  He acknowledged that since the changes proposed by the FTC were already planned, Apple accepted the settlement to avoid a prolonged legal case.

Apple did make a public statement on the settlement via spokesman Steve Dowling, who said, “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.”

Critics of the order that Apple pay $32.5 million in refunds are questioning how the FTC was able to process 37,000 claims and effectively determine which of the purchases was actually made by children of unsuspecting parents or by the parents themselves.  Another question posed by critics is if adults who become addicted to online gaming and are therefore unable to make an informed decision as to when to stop purchasing in-game items could be refunded as well under the guise that they, too, are not completely aware of what they are doing.