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Gordy Stillman/MEDILL

The popular game "Candy Crush Saga" allows in-game purchases that are the subject of a settlement between Apple and the FTC.

Apple to refund at least $32.5 million for kids' app purchases

by Gordy Stillman
Jan 15, 2014

Apple Inc. will pay out at least $32.5 million to parents of children who made purchases inside mobile applications without parental permission.

The refund is part of a settlement with the Federal Trade Commission, which alleged that Apple was violating the law by not telling consumers that when they entered their password, it would authorize an unlimited number of purchases within mobile apps on iPhones and iPads for 15 minutes. A parent could approve one purchase, and then without further action on the parent’s part, a child could make additional purchases.

“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,” said FTC Chairwoman Edith Ramirez in an announcement Wednesday.

Consumer advocates for children also applauded the agreement.

“It’s really good that the FTC has forced Apple to settle,” said Josh Golin, associate director at the Campaign for a Commercial-Free Childhood, a consumer interest group that focuses on child-oriented marketing.

Many apps sold through Apple’s App Store offer consumers the chance to purchase things such character upgrades, additional “lives” and faux currency that can be spent inside the game. For example, the app “Candy Crush Saga,” developed by Ltd., is free to download but the game offers things such as extra moves, extra playing time and special items like a “lollypop hammer” that makes it easier for a player to solve a puzzle. Most so-called in-app purchases start at 99 cents.

Other popular apps that offer in-app purchases include “Clash of Clans,” which features a “chest of gems” within the game that sells for $99.99. The game “Angry Birds,” made by Rovio Entertainment Ltd., offers upgrades to buy more birds, which makes advancing easier. “Pac-man,” developed by Namco-Bandai Games Inc., offers additional mazes for 99 cents.

“Games that target children should not have in-app purchases,” Golin said. He added that children do not understand the “money cost” of making such purchases.

Devorah Heitner, founder of Raising Digital Natives, a site focused on technology’s role in families, raised a similar point, saying, “Kids don’t really understand money.” Additionally, she said teaching kids the value of money is different now because credit and debit cards have supplanted paper money in many areas.

Under the settlement, Apple must change its billing practices by getting consent before any purchase, and consumers consent to future charges, they must be able to take back their consent at any time. The policy would apply to all in-app purchases rather than just apps designed for children.

Calls for comment to Apple were not returned.

Shares of Apple closed at $557.36, up $10.97, or 2 percent.