Apple Will Refund Minimum $32.5 Million to Customers for Kids' In-App Purchases

Apple has settled with the US Federal Trade Commission over App Store in-app purchases, and will have have to refund a minimum of $32.5 million (£19.9m) to customers who complained about thier children making purchases without their consent.

The FTC has also order Apple to change the way its in-app purchases operate "to ensure that it has obtained express, informed consent from consumers before charging them for items sold in mobile apps." The changes need to come into effect by 31 March at the latest.

According to an email sent to staff by company CEO Tim Cook, Apple agreed to the settlement to avoid a "long and distracting legal fight."

The refunds will be made to account holders who make a claim that in-app purchases where made without their consent. Apple will have to tell all customers who made in-app purchases about the availability of refunds.

FTC Chairwoman Edith Ramirez: "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. You cannot charge consumers for purchases they did not authorise."

Negotiations

Cook revealed Apple has entered into a consent decree with the FTC, having negotiated for several months over disclosures about how the App Store handles in-app purchases.

Apple had been criticised by users for making it too easy for children to buy expensive in-app content without their parents' permission; without the correct safeguards in place, purchases of up to £69.99 could be made repeatedly by children looking to buy extras for games they play.

The App Store is one of Apple's most lucrative revenue streams, passing sales of $10 billion in 2013.

Leaked email

According to the leaked email, published by 9to5Mac, Cook said the agreement with the FTC "does not require us to do anything we weren't already going to do" - which suggests Apple is in the process of changing its system anyway.

Complaints were raised when parents found their children could make in-app purchases without knowing their account password, because iOS devices are set by default to allow purchases of content from iTunes and the App Store for 15 minutes after the last time the associated user account password is entered. After 15 minutes has elapsed, the password needs to be re-entered.

Too easy for children to make in-app purchases

Cook said: "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."

By way of apology, Apple emailed 28 million App Store customers - everyone who had made in-app purchases in applications aimed at children - and even "mailed the parents postcards" in the event of emails bouncing back.

Of these 28 million customers, 37,000 made claims for refunds, which Apple is currently processing.

Cook went on: "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."

Addressing the FTC's decision to get involved over an issue Apple thought it had rectified, Cook said: "It doesn't feel right to us...it smacked of double jeopardy," adding that changes proposed by the FTC don't require Apple to do anything it wasn't already planning to do.

"We decided to accept it rather than take on a long and distracting legal fight," Cook said, failing to elaborate on what these future changes will be.