Brett Molina, and Mike Snider

USAToday

The Federal Trade Commission accused online retailer Amazon.com of billing parents for millions of dollars in unauthorized in-app purchases on Kindle Fire tablets and other devices.

In a lawsuit filed Thursday in U.S. District Court, the FTC charges that Amazon willingly allowed kids to make purchases within apps downloaded using mobile devices without parental consent. The unauthorized charges, which ranged from 99 cents to $99 per consumer, were usually for virtual items in games and apps. But the charges add up to millions of dollars in unauthorized purchases, said Jessica Rich, director of the FTC's consumer protection bureau.

Parents were billed "without consent, sticking (them) with unexpected bills in the hundreds of dollars," Rich said. "We are seeking this money back for consumers as well as an order preventing the company from billing consumers without their permission in the future."

When Amazon began allowing in-app purchases in November 2011, the company did not implement measures such as password requirements to prevent kids from unknowingly racking up purchases on their parents' accounts, the FTC charges. Internal Amazon e-mails found that employees acknowledged "problems" for customers just a month later, Rich said.

Employees warned that the practices were "clearly causing problems for a large percentage of our customers" in e-mails included in the FTC's suit, she said. In March 2012, Amazon made a change that required a password for in-app purchases above $20, the FTC complaint alleges.

Last year, even after Amazon set up passwords for charges of less than $20, "what Amazon did not tell consumers is that entering a password would open a window of 15 minutes to an hour, in which children would rack up unlimited charges without parental involvement," Rich said.

This is just the latest in an FTC campaign against unauthorized billing. In January, the FTC settled with Apple over in-app purchases, requiring the company to employ stricter policies for obtaining consent, such as password requests. The settlement was worth $32.5 million.

And last week, the agency filed suit against cell provider T-Mobile accusing it of "cramming" hundreds of millions of unauthorized charges on phone bills. Like those cases, the Amazon suit "highlights a central tenet of consumer protection (that) companies need to get consumers' consent before placing charges on their bill," Rich said. "This principle applies to companies of all types, from brick and mortar businesses to mobile app stores and it applies to charges of all kinds, from purchases of physical goods to charges for the virtual items at issue in today's action."

Amazon, however, refutes the FTC's characterizations. In a letter sent to the FTC earlier this month, the company said that it employed "effective" parental controls and provided users with real-time notices each time an in-app purchase was made.

"We have continuously improved our experience since launch, but even at launch, when customers told us their kids had made purchases they didn't want we refunded those purchases," wrote Andrew DeVore, Amazon's associate general counsel. The letter was submitted after the FTC informed Amazon they would move forward with the lawsuit unless they made changes to their app store model similar to Apple.

The FTC says in-app purchases are "final and non-refundable" by Amazon, with the company keeping 30% of transactions. "The path to seeking a refund has been unclear and rife with deterrents including statements that consumers cannot, in fact, get a refund for in-app charges," Rich said.

She would not estimate how large a fine could result — or the size of a possible settlement — in the Amazon case. The lawsuit targets virtual items that are often unknowingly purchased by kids in games and apps.

Many apps on smartphones and tablets include supplemental purchases users can make to enhance their experience. An example cited by the FTC in the Amazon suit involves the case of a mother whose daughters acquired more than $350 in virtual goods without consent.

Hudson Kingston, legal director for the Center for Digital Democracy, praised the FTC move. "Today's FTC action shows that consumers who have been charged for their kids unauthorized in-app purchases should not have to foot the bill."

Follow Brett Molina and Mike Snider on Twitter: @brettmolina23 and @MikeSnider