FTC settlement with Amazon yields $70 million for consumers, advice for business

The FTC’s law enforcement action against Amazon for unauthorized billing recently settled, leaving two key takeaways: 1) Consumers are eligible for more than $70 million in refunds; and 2) Businesses need to get customers’ express consent before placing charges on their credit or debit cards.

Last year, a federal judge in Seattle ruled in the FTC’s favor in an action against Amazon for billing consumers for unauthorized in-app charges incurred by children. Kid-focused apps available in Amazon’s Appstore prompted children to acquire virtual currency – for example, a “boatload of doughnuts.” But to parents who got stuck with the bill, it was more like a boatload of dough – millions of dollars in surprise charges they didn’t approve.

The Court agreed that Amazon’s practice of charging parents real live money for make-believe items in kids’ apps without parents’ consent violated the FTC Act. The FTC had already settled similar cases with Apple and Google.

The next chapter in the story is to make sure that people who were harmed by Amazon’s illegal practices get their money back. Under the terms of the settlement, Amazon is making more than $70 million in refunds available to customers who were charged for unauthorized in-app purchases made by a child.

Amazon may owe you a refund if:

• You were billed for charges made by a child that you didn’t authorize, and
• The charges were for in-app purchases made between November 2011 and May 2016.

The refund process is simple. If you’re eligible, you should have received an email from Amazon. If you think Amazon owes you money, but you haven’t received an email, there are two ways to find out more:

1. Go to https://www.amazon.com/gp/mas/refund-orders/in-apprefund/ or
2. Log into your Amazon.com account and go to the Message Center. If you’re eligible, you’ll find more information under Important Messages.

The refund request process is online only and consumers don’t have to send anything by mail to submit a refund request. The deadline for applying for a refund is May 28, 2018. Consumers can call Amazon at 866-216-1072 if they have questions.

The Amazon case also offers compliance currency for companies. Most importantly, as the Judge observed, “Courts have repeatedly held that billing customers without permission causes injury for the purposes of asserting a claim under Section 5 of the FTC Act.” Prudent businesses are careful to explain the nature of the transaction up front and get customers’ express consent before placing charges on their accounts.

Companies that use payment methods other than greenbacks on the barrelhead should pay particular attention to that principle. As the Court held, “Many of Amazon’s arguments improperly assume a familiarity with in-app purchases on the part of consumers.” It’s unwise for companies simply to assume that people grasp how new payment mechanisms work. A clearer explanation at the outset can reduce the risk of antagonizing customers and violating the law.

Furthermore, the case stands for the established proposition that if the disclosure of information is necessary to prevent a practice from being deceptive or unfair, the disclosure must be clear and conspicuous. Amazon argued that a small hyperlink that simply said “In-App Purchasing” was sufficient to alert consumers that they would be billed for in-app charges. Not so, ruled the Court.

If your company is looking for more guidance, consult .com Disclosures: How to Make Effective Disclosures in Digital Advertising.