Privacy & Information Security Law Blog

On January 15, 2014, the Federal Trade Commission announced a proposed settlement with Apple Inc. stemming from allegations that the company billed consumers for mobile app charges incurred by children without their parents’ consent. Specifically, the FTC’s complaint alleges that Apple violated the FTC Act by not informing account holders that, for a 15-minute window after entering their password to approve a single in-app purchase, their children could make unlimited purchases without further action by the parent.

Apple agreed to pay a minimum of $32.5 million to provide refunds to consumers. To the extent not all of the $32.5 million is refunded to eligible account holders, the balance will be deposited into a fund to be administered by the FTC. According to the Order, the fund can then be used for equitable relief at the FTC’s discretion. The company will be required to change its billing practices no later than March 31, 2014 to ensure that it has obtained express, informed consent from consumers prior to billing them for in-app charges. Apple also must give consumers the option to withdraw their consent for future charges at any time.

The FTC vote to accept the consent agreement package was 3-1, with Commissioner Joshua Wright issuing a dissenting statement. Chairwoman Edith Ramirez and Commissioner Julie Brill issued a joint statement, and Commissioner Maureen Ohlhausen issued a separate statement.

This settlement follows an increased focus by the FTC on mobile technology issues: in March 2013, the FTC released a report on key consumer and privacy issues resulting from the increasingly widespread use of mobile payments; in February 2013, the FTC issued recommendations for transparency in mobile privacy disclosures; and in December 2012, the FTC expressed concern regarding privacy disclosures on mobile applications for kids.

The settlement with Apple is open for public comment until February 14, 2014.

Update: On March 27, 2014, the FTC approved the final settlement order with Apple.