Continuing its focus on in-app purchases, the Federal Trade Commission reached a $19 million deal with Google, Inc. to settle allegations the company billed consumers for purchases made by children.
The agency has already taken action against Google competitors, settling similar charges against Apple for $32.5 million and filing a complaint against Amazon in Washington federal court.
According to the FTC, Google violated the Federal Trade Commission Act’s prohibition on unfair commercial practices by billing consumers for in-app purchases made by children without the authorization of the account holder. Beginning in 2011, apps downloaded from the Google Play store did not require the entry of a password to make in-app purchases. Google later changed its policy in 2012 to require a password for such purchases but created a 30-minute window during which purchases may be made without a password.
Over the last three years, “many thousands” of consumers complained to Google about unauthorized charges incurred by children making in-app purchases, some reaching hundreds of dollars, the FTC said. The company failed to take appropriate action by typically referring customers to the app developer and internally referring to the issue as “family fraud.”
To settle the action, Google agreed to provide full refunds to parents with a minimum total of $19 million. The company will contact all customers who made an in-app charge to provide information about the refund process. If the total refunds are less than $19 million within 12 months after the settlement becomes final, the balance will be paid to the FTC.
Google also promised to modify its billing practices to require express, informed consent prior to billing for in-app charges.
To read the FTC’s complaint and consent order in In the Matter of Google, Inc., click here.
To read the remarks of FTC Chairwoman Edith Ramirez about the settlement, click here.
Why it matters: The settlement with the FTC doesn’t end Google’s in-app charge woes, as the company is also facing a consumer class action with similar allegations. The larger lesson for advertisers: the Commission is keeping a close eye on mobile commerce and technology. “We have seen that consumers are increasingly using smartphones and tablets for many beneficial purposes, from communication to entertainment to shopping,” FTC Chairwoman Edith Ramirez said in a statement about the deal. “The FTC is committed to keeping consumers protected as this technology becomes more widely available and used, and that includes ensuring that consumers provide their consent before charges are incurred on their mobile devices.”