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Apple will refund at least $32.5M in app case

WASHINGTON — Kids gleefully snapped up virtual pet food, gems or other items while playing games on their mobile devices, while the bills from Apple mounted, often without parents' knowledge. Now the tech giant has agreed to refund the money.

After tens of thousands of consumer complaints, the Federal Trade Commission said Wednesday that Apple will pay at least $32.5 million to settle a federal case involving those in-app purchases. Apple also must change its billing practices to make it more obvious that an actual purchase is taking place during the course of a game or an app.

Just how could a kid buy these things without Mom or Dad's knowledge and run up bills into the hundreds of dollars or more?

Let's say a game player wants to advance to a new level or buy coins, a chest of gems or treats for a virtual pet. It just takes a click, and then the app asks for a password. The child turns to a parent, who punches it in.

But, according to the FTC complaint, Apple did not always make it clear that those parents were buying something. Parents also were not told that entering the password started a 15-minute clock during which kids could make unlimited purchases without any further action by an adult, the agency said.

A single purchase generally can range from 99 cents to $99, the commission said.

One parent told the FTC that her daughter had spent $2,600 in Tap Pet Hotel, in which children can build their own pet lodging. The game is free to download and play, but it takes in-app purchases for treats and coins for the pets.

Other consumers reported unauthorized purchases by children totaling more than $500 in the apps Dragon Story and Tiny Zoo Friends.

Apple will have until March 31 to come up with a billing system that ensures the company obtains consumers' informed consent before billing them for in-app purchases.

The settlement involves all apps in which minors made unauthorized purchases.

Children's applications sold in Apple's store generated about 44 percent of its revenue from purchases made while using the software during November, according to the latest data from the research firm App Annie. The remaining revenue came from up-front fees required to download some children's apps from Apple's store.

In the FTC case, the $32.5 million payout is a minimum. As part of the settlement, Apple must pay full refunds to consumers for kids' unauthorized purchases, so that figure could rise.

Apple will refund at least $32.5M in app case 01/15/14 [Last modified: Wednesday, January 15, 2014 8:10pm]
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