Apple Agrees to FTC Terms Over In-App Purchases With $32 Million Settlement

AppstoreApple and the U.S. Federal Trade Commission have entered into a consent decree over in-app purchases on the App Store. In a memo to Apple employees, CEO Tim Cook wrote that the company felt it had no other choice.

According to the agreement, Apple will be required to provide full refunds to parents whose children purchased unauthorized in-app items, setting a floor of $32 million on refunds.

A large part of the FTC's concern was related to a fifteen-minute window after a password is entered on the App Store, during which other purchases can be made without a password being entered. Apple will now be required to notify users that the fifteen-minute window exists to obtain "expressed and informed consent" from its customers.

In early 2013, Apple settled a class action lawsuit originally filed by parents after their children ran up hundreds of dollars on in-app purchases in freemium games.

In the memo, which was obtained by Re/code, Cook wrote that it didn't "feel right for the FTC to sue over a case that had already been settled" and it "smacked of double jeopardy".

From: Tim Cook
Date: January 15, 2014
Subject: FTC announcement

Team,

I want to let you know that Apple has entered into a consent decree with the U.S. Federal Trade Commission. We have been negotiating with the FTC for several months over disclosures about the in-app purchase feature of the App Store, because younger customers have sometimes been able to make purchases without their parents’ consent. I know this announcement will come as a surprise to many of you since Apple has led the industry by making the App Store a safe place for customers of all ages.

From the very beginning, protecting children has been a top priority for the App Store team and everyone at Apple. The store is thoughtfully curated, and we hold app developers to Apple’s own high standards of security, privacy, usefulness and decency, among others. The parental controls in iOS are strong, intuitive and customizable, and we’ve continued to add ways for parents to protect their children. These controls go far beyond the features of other mobile device and OS makers, most of whom don’t even review the apps they sell to children.

When we introduced in-app purchases in 2009, we proactively offered parents a way to disable the function with a single switch. When in-app purchases were enabled and a password was entered to download an app, the App Store allowed purchases for 15 minutes without requiring a password. The 15-minute window had been there since the launch of the App Store in 2008 and was aimed at making the App Store easy to use, but some younger customers discovered that it also allowed them to make in-app purchases without a parent’s approval.

We heard from some customers with children that it was too easy to make in-app purchases, so we moved quickly to make improvements. We even created additional steps in the purchasing process, because these steps are so helpful to parents.

Last year, we set out to refund any in-app purchase which may have been made without a parent’s permission. We wanted to reach every customer who might have been affected, so we sent emails to 28 million App Store customers – anyone who had made an in-app purchase in a game designed for kids. When some emails bounced, we mailed the parents postcards. In all, we received 37,000 claims and we will be reimbursing each one as promised.

A federal judge agreed with our actions as a full settlement and we felt we had made things right for everyone. Then, the FTC got involved and we faced the prospect of a second lawsuit over the very same issue.

It doesn’t feel right for the FTC to sue over a case that had already been settled. 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.

The App Store is one of Apple’s most important innovations, and it’s wildly popular with our customers around the world because they know they can trust Apple. You and your coworkers have helped Apple earn that trust, which we value and respect above all else.

Apple is a company full of disruptive ideas and innovative people, who are also committed to upholding the highest moral, legal and ethical standards in everything we do. As I’ve said before, we believe technology can serve humankind’s deepest values and highest aspirations. As Apple continues to grow, there will inevitably be scrutiny and criticism along our journey. We don’t shy away from these kinds of questions, because we are confident in the integrity of our company and our coworkers.

Thank you for the hard work you do to delight our customers, and for showing them at every turn that Apple is worthy of their trust.

Tim

In response, the FTC said that its proposed order is more robust than the settlement in the class action lawsuit, and that the resolution in that lawsuit didn't require Apple to change its behavior. Additionally, the FTC's settlement does not put a cap on the amount that could be refunded to parents, while the lawsuit's did.

Top Rated Comments

applesith Avatar
93 months ago
Parents should be more involved with their kids and know what they are giving them access to on devices.
Score: 43 Votes (Like | Disagree)
osx11 Avatar
93 months ago
Can Apple do more to make sure kids don't make in-app purchases? Maybe!

Can parents do more to see what their kids are doing at such a young age? Definitely!
Score: 37 Votes (Like | Disagree)
Snowy_River Avatar
93 months ago
IAP are evil get rid of them

Freemium games that charge you $100 for something that will benefit you for a few minutes or hours are evil. Those are the things to get rid of. Personally, I despise the freemium model. It's designed to get customers to spend more on a game than they would have been willing to spend on an outright purchase. I'm not a big fan of the subscription model either (yes, I know, that's a whole other discussion), but I think that the freemium model is FAR worse.

IAP, IMO, are not a bad thing. As an example of a good implementation of them, there is an app that I work with that has several modules that offer expanded functionality. By breaking up the functionality, they allow me the flexibility to only buy what I need. It works quite well. Also, IAP can be used in games to enable free trial and pay to enable the full game (as a 1 time purchase). I've seen a number of games follow this approach, rather than having separate free versions that are limited, and I think it works better and makes it more likely that a customer buys the full game.

As for the whole parental question, my son succeeded in using an IAP in a game on my iPad. I was right there. He found a game that he wanted, so I downloaded it. We launched it, and there was something that he wanted (it was the option to fly a particular plane), so he clicked on it, a little dialog popped up, and he touched the OK button, all in a moment when I was answering a question my wife had asked me. BAM! A $10 purchase. Wrote to Apple and they refunded the purchase, but it drove home how quick and easy it was for my son, who occasionally plays on my iPad or my wife's iPad, to make a purchase if we've recently had a reason to enter the password.

The steps we took to deal with this were straightforward. At first, I tried setting the option to always ask for a password. This became an issue primarily because this meant that the password was required for every update, in addition to new downloads and IAPs. So, that was switched back. The final solution was to turn off IAP, in the premise that, if my wife or I want to make an IAP, we know how to turn it back on so we can do it. This has worked quite well. There have been a couple of instances where my son has accidentally (or intentionally) hit a button that would have lead to an IAP, but it was quite promptly blocked.

I appreciated the fact that Apple refunded that one mistaken purchase. But, having seen the potential issue, any future failures are on me. Knowing that my son is capable of doing this, it's up to me to make sure that there are reasonable safeguards against it. Eventually, those safeguards will include him having his own iPad with the setting to always ask for the password enabled.

To pu it another way, fool me once, shame on you, fool me twice, shame on me.
Score: 27 Votes (Like | Disagree)
Speedy Gonzalez Avatar
93 months ago
IAP are evil get rid of them
Score: 23 Votes (Like | Disagree)
Rogifan Avatar
93 months ago
Can Apple do more to make sure kids don't make in-app purchases? Maybe!

Can parents do more to see what their kids are doing at such a young age? Definitely!

Much easier to sue a company with deep pockets.
Score: 19 Votes (Like | Disagree)
allistera Avatar
93 months ago
I guess the FTC where running low on funds.
Score: 13 Votes (Like | Disagree)

Top Stories

jon prosser imac 2021colors

Prosser: 2021 iMac to Come in Five Colors, Apple Silicon Mac Pro to Resemble 'Stacked' Mac Minis

Wednesday February 24, 2021 7:26 am PST by
Hit-and-miss leaker Jon Prosser has today alleged that the upcoming 2021 iMac models will offer five color options, mirroring the colors of the fourth-generation iPad Air, and revealed a number of additional details about the Mac Pro with Apple Silicon. In a new video on YouTube channel FrontPageTech, Prosser explained that the redesigned iMacs will come featuring options for Silver, Space ...
2021 mbp sd slot feature2

Kuo: New MacBook Pro Models With HDMI Port and SD Card Reader to Launch Later This Year

Monday February 22, 2021 8:52 pm PST by
Apple plans to release two new MacBook Pro models equipped with an HDMI port and SD card reader in the second half of 2021, according to analyst Ming-Chi Kuo, who outlined his expectations in a research note obtained by MacRumors. The return of an SD card reader was first reported by Bloomberg's Mark Gurman last month. "We predict that Apple's two new MacBook Pro models in 2H21 will have...
m1 mac mini

M1 Mac Users Report Excessive SSD Wear

Tuesday February 23, 2021 7:07 am PST by
Over the past week, some M1 Mac users have been reporting alarming SSD health readings, suggesting that these devices are writing extraordinary amounts of data to their drives (via iMore). Across Twitter and the MacRumors forums, users are reporting that M1 Macs are experiencing extremely high drive writes over a short space of time. In what appear to be the most severe cases, M1 Macs are sai...
iphone 12 pro display video

BOE Rumored to Supply iPhone 13 Display Panels After iPhone 12 Failures

Monday February 22, 2021 9:54 am PST by
Display manufacturer BOE will be one of the main suppliers of OLED panels for iPhone 13 models, according to a new report today from Taiwan's Economic Daily News. BOE is said to be working with touch panel manufacturer General Interface Solution (GIS), part of the Hon Hai Group to develop OLED panels. Multiple iPhone 12 rumors suggested that BOE would supply some panels for the devices,...
flat mbp 14 inch feature yellow

Redesigned 14-Inch MacBook Pro Expected to Feature Brighter Mini-LED Display With Slimmer Bezels and More

Thursday February 25, 2021 7:48 am PST by
Apple plans to unveil new 14-inch and 16-inch MacBook Pro models with Mini-LED-backlit displays in the second half of this year, according to industry sources cited by Taiwanese supply chain publication DigiTimes. The report claims that Radiant Opto-Electronics will be the exclusive supplier of the Mini-LED backlight units, while Quanta Computer is said to be tasked with final assembly of the...
anker magsafe powercore battery pack

Anker Releases MagSafe-Compatible Battery Pack for iPhone 12 Lineup

Tuesday February 23, 2021 7:49 am PST by
Following rumors that Apple is working on a MagSafe battery pack for iPhone 12 models, popular accessory maker Anker has beaten Apple to the punch with the release of its PowerCore Magnetic 5K Wireless Power Bank. First previewed at CES 2021, the PowerCore battery pack magnetically attaches to the back of any iPhone 12 model and provides 5W of wireless charging. With a 5,000 mAh capacity,...
iPad Pro Mini LED

New iPad Pro and MacBook Models With Mini-LED Displays Again Rumored to Launch This Year

Monday February 22, 2021 9:32 pm PST by
Taiwanese company Ennostar will begin production of Mini-LED backlight units for an upcoming 12.9-inch iPad Pro in the late first quarter or second quarter of this year, according to industry sources cited by DigiTimes. Ennostar is a holding company that was jointly established in January 2021 by LED-related manufacturers Epistar and Lextar Electronics. Apple is expected to unveil the new ...
First Look Big Sur Feature2

Apple Releases macOS Big Sur 11.2.2 to Prevent MacBooks From Being Damaged by Third-Party Non-Compliant Docks

Thursday February 25, 2021 10:07 am PST by
Apple today released macOS Big Sur 11.2.2, the fourth update to the macOS Big Sur operating system that launched in November. macOS Big Sur 11.2.2 comes two weeks after the release of macOS Big Sur 11.2.1, a bug fix update. The new ‌‌‌‌macOS Big Sur‌‌‌ 11.2.2‌ update can be downloaded for free on all eligible Macs using the Software Update section of System Preferences....
steam apple logo

Valve Ordered to Give Apple Information on 436 Steam Games As Part of Epic Games Legal Case

Thursday February 25, 2021 1:50 am PST by
Valve, the makers behind popular game distribution platform Steam, will be forced to hand over aggregate historical sales, price, and other information on 436 games hosted on the store to Apple, as part of the Apple vs. Epic Games antitrust case. As reported in a paywalled report by Law360, during a virtual discovery hearing on Wednesday, U.S. Magistrate Judge Thomas S. Hixson ordered that...
scott forstall original iphone

Epic Games 'Attempting to Locate' Former iOS Chief Scott Forstall to Testify in Ongoing Legal Battle with Apple

Tuesday February 23, 2021 4:22 am PST by
As part of its ongoing legal battle, Epic Games is now seeking testimony from Apple's former iOS software chief, Scott Forstall. Forstall left Apple in 2013, in what was widely reported at the time to have been a forced exit, largely because of the botched early launch of Apple Maps. Since then, Forstall has kept a very low profile and has only made a few media appearances in the past few...