Google Settles With FTC Over In-App Purchases Dispute

The Federal Trade Commission (FTC) is increasingly focused on the technology sector and is using its monitoring and enforcement powers to crack down on alleged consumer protection violations by big tech firms.

Google reached a major settlement with the FTC this month, agreeing to pay $19 million to consumers whose children made purchases through Google Play, an Android-based app store. The agency alleged that Google did not properly disclose the ability to purchase items in children-oriented apps and games. Many free or low-priced mobile apps and games sold in the Google Play store encourage users to purchase virtual items in order to advance in the game. It is reported that in-app purchases have become the second largest source of revenue for the company, after advertising.

The FTC’s complaint alleged that, by billing parents for purchases made on apps downloaded through the Google Play store, Google had violated federal law prohibiting “unfair” commercial practices. When the company first introduced in-app charges to Google Play in 2011, there was no password feature. It later adjusted the system so that a popup window appeared before a purchase, requiring the account holder’s password. But account holders were not informed that subsequent purchases could be made during a 30-minute window after the password was entered. Many consumers reported hundreds of dollars of unauthorized charges that were incurred within this 30-minute time period.

As part of the settlement, Google will not only refund $19 million to consumers whose children made such purchases, it will also modify its billing practices to ensure that it obtains express consent before charging consumers for items sold within mobile apps.

Google was not the only target of the FTC’s action. This complaint arose from a three-year investigation by the FTC into in-app purchases on devices that run software by Google, Apple, and Amazon. A similar lawsuit was filed against Apple, and that company agreed to a $32.5 million settlement in January. Amazon announced this summer that it would fight FTC charges in federal court. Since the FTC first filed its complaints, Apple has changed its practices and Amazon has started offering parental safety tools to prevent such purchases.

Although Google has concluded its settlement with the FTC, the company still faces a similar class action lawsuit over in-app purchases. The plaintiffs’ case survived a motion to dismiss a few months ago and an amended complaint was filed in August. It remains to be seen how Google’s settlement with the FTC might affect that private litigation.

The FTC is accepting public comment on its Google settlement until October 6, 2014.

About The Authors

Matt has counseled clients on the evaluation of data privacy risks, responses and solutions, and he serves as a breach coach, providing analysis and advice to address data breach events, including forensics, notification pursuant to federal and state laws, credit monitoring, and public relations issues. In addition to breach response, Matt has counseled insurers on the underwriting of cyber/tech policies.

Posted in Privacy, Regulations
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In the new digital world, individuals and businesses are almost entirely dependent on computer technology and electronic communications to function on a daily basis. Although the power of modern technology is a source of opportunity and inspiration—it also poses huge challenges, from protecting privacy and securing proprietary data to adhering to fast-changing statutory and regulatory requirements. The Cyber Law Monitor blog covers privacy, data security, technology, and cyber space. It tracks major legal and policy developments and provides analysis of current events.
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