Apple has agreed to refund at least $32.5 million to customers in a settlement with the Federal Trade Commission (FTC) over unauthorized in-app purchases made by children, the agency announced Wednesday.
The FTC complaint found that Apple charged customers millions of dollars for in-app purchases made by children without their parents' consent. As part of the settlement, Apple must also change its billing practices to ensure that it has obtained "express, informed consent" from customers before charging them for items sold in mobile apps.
"This settlement is a victory for consumers harmed by Apple's unfair billing, and a signal to the business community: whether you're doing business in the mobile arena or the mall down the street, fundamental consumer protections apply," FTC Chairwoman Edith Ramirez said in a statement. "You cannot charge consumers for purchases they did not authorize."
The issue dates back to 2011, when the Washington Post ran a story that discussed an 8-year-old who had racked up $1,400 in in-app charges via Capcom's Smurfs' Village game. Amidst the uproar, Apple added a password requirement for in-app purchases via its iOS 4.3 update.
According to the FTC, however, typing in an Apple ID password leaves the account open for additional purchases for 15 minutes. Parents might think they're approving one $0.99 purchase, but junior then goes on to make another 10 purchases before the password window expires.
Meanwhile, the request-for-password pop-up that some parents see does not always explain that parents are about to authorize a purchase, the FTC said.
The agreement comes after Apple previously settled a 2011 class-action lawsuit over the same issue.
Apple did not immediately respond to a request for comment about the FTC agreement. But in a leaked memo obtained by Re/code, Apple CEO Tim Cook does not seem pleased with the FTC agreement. He said the company has already reached out to every potentially affected customer, and has received 37,000 claims, which it plans to reimburse.
"It doesn't feel right for the FTC to sue over a case that had already been settled," Cook wrote. "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."
Under the FTC agreement, Apple will need to again notify customers about the issue and provide instructions on how to obtain a refund for unauthorized purchases made by kids. In its complaint, the FTC said one customer reported that her daughter had spent $2,600 in the app Tap Pet Hotel and other customers reported unauthorized purchases by children totaling more than $500 in the apps Dragon Story and Tiny Zoo Friends.