Apple to refund $32.5 million to settle FTC complaint it charged for kids’ In-App Purchases

The Federal Trade Commission (“FTC”) announced last week (15 January 2014) that, pursuant to a settlement with Apple Inc., the company has agreed to provide full refunds to consumersto settle a FTC complaint that the company billed consumers for millions of dollars of charges incurred by children in kids’ mobile apps without their parents’ consent.  

The FTC’s complaint against Apple alleges that the company violated the FTC Act by failing to tell parents that by entering a password they were approving a single in-app purchase and also 15 minutes of additional unlimited purchases their children could make without further action by the parent. In addition, according to the complaint, Apple has often presented a screen with a prompt for a parent to enter his or her password in a kids’ app without explaining to the account holder that password entry would finalize any purchase.
 
The settlement requires Apple to modify its billing practices to ensure that Apple obtains consumers’ express, informed consent prior to billing them for in-app charges. Additionally, if the company receives consumers’ consent for future charges, the consumer must have the option to withdraw their consent at any time. Apple is obliged to make these changes no later than March 31, 2014.
 
Under the settlement, Apple will be required to provide full refunds, totaling a minimum of $32.5 million, to consumers who were billed for in-app charges that were incurred by children and were either accidental or not authorized by the consumer
 
A copy of the FTC’s complaint is available here, and the settlement can be viewed here

Data Privacy and Security Bill introduced in the U.S. Senate

On 8 January 2014, Senator Patrick Leahy - the Senate Judiciary Committee Chairman - reintroduced a bill that would protect Americans’ personal information and privacy. The bill, cited as the “Personal Data Privacy and Security Act of 2014” was first introduced by the Senator in 2005 and he has reintroduced the legislation in each of the last four Congresses.
 
According to the bill, a national standard for data-breach notification would be established, requiring American businesses that collect and store consumers’ sensitive personal information to safeguard that information from cyber threats. The bill requires companies that maintain personal data to comply with specified safeguards identified by the FTC for the protection of personal data, and to establish and implement internal policies to protect data privacy and securitythat includes administrative, technical, and physical safeguards appropriate to the size and complexity of the entity and the nature and scope of its activities. In addition, the bill would impose enhanced punishment for identity theft and other violations of data privacy and security.

The FTC updated its guidance for Media Outlets on spotting false weight-loss claims in advertising

The FTC has updated guidance for publishers and broadcasters on how to spot phony weight-loss claims when screening ads for publication. The guidance describes seven weight loss claims that should prompt a “gut check” – a second look to make sure publishers are not running advertisements with claims known to be false.  

The guide also contains advice on dealing with two common problematic areas:

  • Consumer testimonials - the guidance explains that according to the law, advertisers that use endorsements have two choices:  either the results in the ad must be typical of what other consumers can expect to achieve or the ad must clearly and conspicuously disclose what the typical results are.
  • Fine print disclosures - the guidance outlines what makes a disclosure properly “clear and conspicuous”. First: “it stands out in an ad.  It finds you; you don’t have to look for it”. Specifically, disclosures should be - close to the claims they relate to and not buried in footnotes or blocks of text people aren’t likely to read; in a font that’s easy to read and at least as large as other fonts the advertiser uses to convey the claim; in a shade that stands out against the background; for video ads, on the screen long enough to be noticed, read, and understood; for video or radio ads, read at a cadence that’s easy for consumers to follow; and in words consumers will understand.