FTC Settlement with Google to Require Refund of Unauthorized In-App Charges

The Federal Trade Commission has announced that Google has agreed to refund customers’ unauthorized in-app purchases made by their children in the Google Play Store pursuant to a settlement over a complaint filed by the Commission alleging violations of Section 5(a) of the FTC Act, 15 U.S.C. Section 45(a) prohibiting unfair or defective acts or practices affecting commerce.  Attached is the FTC press release of the settlement.  In particular, the complaint alleged that Google’s practice had been to bill Google account holders for children’s activities in applications without obtaining the prior consent of the Google account holder, and that the refund process to get the unauthorized charges reversed had been difficult.

The total amount of refunds Google is anticipated to make pursuant to this settlement exceeds $19 million.  According to the FTC, Google has also agreed as part of the settlement to procure express, informed consent from customers before charging them for any items sold in a an app going forward.

The move by Google to settle the FTC’s complaint follows a similar move by Apple earlier in the year to settle the complaint initiated  by the FTC  on similar grounds.    Like Google, Apple agreed to refund all unauthorized in-app purchases made by children and to change its billing practices to obtain express, informed consent from customers before charging them for items sold in a mobile app, according to the press release issued by the FTC following its settlement with Apple.   The estimated cost of the refunds in the Apple case was estimated to be at $32.5 million.

In looking at the outcome of these two cases, I can’t help but question whether the Federal Trade Commission’s regulatory involvement in the smartphone app business is a good development for the industry or not.  On one hand, there were clearly a large number of angry Americans who were billed for unauthorized charges through their smartphones and apparently not getting relief from either Google or Apple.  So, clearly from that perspective, the outcome was the right one for consumers.

But isn’t the real problem here the smartphone app platforms themselves for both companies and the fact that neither company was responding to customers who were getting billed for unauthorized changes by fixing the platform?  Should that have required government action to fix?  Shouldn’t the private market have been able to accomplish the same action?

I personally am a little troubled by the fact that the FTC seems to be inserting itself in the digital world to the degree that it seems to be doing.  Even though the outcome was the right one for consumers in this particular case, I wonder if we should all be concerned with the FTC’s continued interference with the digital marketplace.

As for the companies themselves who were the subject of the complaints: clearly the industry has been generating revenues from unintended purchases.  Is that really the way that the industry should be conducting business?  Perhaps the industry itself should step up to the plate and make more of an effort to remedy the way that purchases are made on a smartphone to eliminate accidental purchases altogether.