January 15, 2014
Last June, Apple settled a class action lawsuit over the unauthorized use of in-app purchasing in games and apps in the App Store. The company has now signed a consent decree with the Federal Trade Commission (FTC) over the same issue. The result will mean millions in refunds to users, and revisions to Apple’s App Store billing practices, according to Re/Code. The agreement calls for Apple to provide full refunds to consumers affected by confusion over in-app purchases. It will mean “doling out a minimum of $32.5 million in redress.” Cupertino is also “to ensure that it has obtained consumers’ express consent for in-app purchases before charging them.” In a lengthy memo sent to Apple employees, CEO Tim Cook is clearly unhappy, noting “It doesn’t feel right for the FTC to sue over a case that had already been settled.” He continues, “To us, it smacked of double jeopardy. However, the consent decree the FTC proposed does not require us to do anything we weren’t already going to do, so we decided to accept it rather than take on a long and distracting legal fight.” FTC chairwoman Edith Ramirez calls the settlement “a victory for consumers harmed by Apple’s unfair billing, and a signal to the business community: whether you’re doing business in the mobile arena or the mall down the street, fundamental consumer protections apply.” She concludes, “You cannot charge consumers for purchases they did not authorize.” According to the agreement, Apple has until March 31, 2014 to implement a system where Apple “obtains consumers’ express, informed consent” prior to billing them for in-app purchases. “If the company gets consumers’ consent for future charges, consumers must have the option to withdraw their consent at any time.” Finally, Apple and the FTC agreed to the following, with regards to refunds:
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. Apple must make these refunds promptly, upon request from an account holder. Apple is required to give notice of the availability of refunds to all consumers charged for in-app charges with instructions on how to obtain a refund for unauthorized purchases by kids. Should Apple issue less than $32.5 million in refunds to consumers within the 12 months after the settlement becomes final, the company must remit the balance to the Commission.Apple should definitely be commended for resolving this issue as they have. Still, I question why the FTC got involved once the class action lawsuit was resolved. Cook is right in suggesting this smacked of double jeopardy. Unfortunately for Apple, legally double jeopardy doesn’t apply in this case. Last year's class action lawsuit settlement called for Apple to reimburse customers $5 in the form of an iTunes gift card. We’ll continue to follow this story and let you know when we learn more about the refund process. In the meantime, do you believe Apple should have settled this case as they did?