Amazon Liable for Children's In-App Purchases, Court Rules

Amazon.com Inc. is liable for in-app purchases children made years ago without their parents' authorization, a federal court ruled late Tuesday.

The Seattle retailer didn't provide sufficient safeguards to prevent children from making purchases within apps that were free to download, according to the U.S. District Court for the Western District ​of​ Washington state. The Federal Trade Commission filed the case against Amazon in 2014, citing thousands of complaints about unauthorized in-app charges for virtual goods or services, totaling hundreds of dollars in some cases.

"Given the design of the Appstore and procedures around in-app purchases, it is reasonable to conclude that many customers were never aware that they had made an in-app purchase," the court said.

Amazon has since taken measures to prevent such purchases and said it has reimbursed customers who lodged complaints. But the ruling means Amazon will face additional monetary penalties, which will be determined later.

An Amazon spokesman didn't respond to a request for comment.

The FTC had reached settlements with Apple Inc. and Alphabet Inc.'s Google in 2014 about similar unauthorized in-app purchases for $32.5 million and $19 million, respectively. But Amazon chose instead to challenge the agency in court. Today, those app stores require customers to type in their password for in-app purchases, which may include new levels or characters in a game or additional music options.

App stores, such as the one on Amazon's Fire tablet computers, are a key battleground among tech firms. In addition to storing valuable user information, such as credit card numbers, companies also keep a 30% cut of purchases made through the app stores, making them a lucrative revenue stream.

The court rejected Amazon's argument that its customers weren't affected because it liberally provided refunds.

Amazon won one aspect of the case. Though the FTC sought to require more consent from Amazon customers, the court ruled Amazon had implemented sufficient safeguards since the case began.

Write to Greg Bensinger at [e-mail]

(END) Dow Jones Newswires

April 27, 2016 18:25 ET (22:25 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.