Apple Agrees to Sign FTC Consent Decree and Pay $32.5 Million Fine for Handling of In-App Purchases

ned-game-of-thronesThis morning, Apple CEO Tim Cook wrote a letter to all employees, letting them know that the company has agreed to sign a decree with the Federal Trade Commission (FTC) regarding in-app purchases in the App Store. You may recall that Apple came under fire a few years ago when it was discovered that children were making unauthorized purchases during the 15-minute window in which an account password was still active.

Cook explained that, even though Federal courts had already approved of the actions that Apple took to compensate customers and keep children from making in-app purchases without their parents’ consent, the FTC decided to get involved. Instead of taking the FTC to court and spending time and money on lengthy trials in order to clear their name, Apple decided to sign their decree, since it pertained to actions the company was already going to take anyway.

A few hours later, the FTC released a statement that basically made it sound like Apple is being required by the department to pay money and change policies that would not have otherwise been done if they hadn’t stepped in to save the day.

This reminds me of when Eddard Stark confessed to treason in order to save his daughter’s life (Game of Thrones reference). Apple only agreed to the settlement because they were planning on doing the things the FTC wanted them to do anyway. Nothing is different. However, the FTC wants Apple to look like a bunch of thugs trying to steal money from children and is painting a picture that the iPad maker would have gone on stealing from children if they had not stopped them.

Under the FTC’s settlement, Apple will be required to refund customers $32.5 million in damages for accidental or unauthorized in-app purchases made by consumers or their children. If Apple doesn’t refund all $32 million within 12 months, they must give it to the FTC instead. How that ensures consumers are appropriately refunded makes no sense to me.

Apple will also be required to change its billing policies and obtain “consumers’ express, informed consent” before they are billed for the in-app charges. It is likely that Apple will update iOS 7 with additional wording in the in-app pop-up message for people who are confused about what it means to buy something inside an app.

As Cook stated in his email to employees, the consent decree does not require Apple to do anything they weren’t already going to do (except maybe the part where they have to hand over any money not refunded to customers). So, the FTC’s negative press release makes the department look more like a 15-year old boy playing at being a king than the heroic savior they are trying to convince people they are.


About Lory: Writer of all things app related, traveler of the space-time continuum, baker of really great cookies. Follow me @appaholik