Amazon sued by FTC over kids' charges on apps

The Federal Trade Commission filed a lawsuit against Amazon.com, accusing the retail giant of unlawfully charging millions of dollars on apps designed for children, the agency announced on Thursday.

The FTC alleges that Amazon, which collects 30 percent of in-app charges from apps downloaded from the site, was billing account holders even though no password was required or any consent was given to allow children to ring up the charges. The company received thousands of complaints from customers, the FTC said.

"Amazon's in-app system allowed children to incur unlimited charges on their parents' accounts without permission," FTC Chairwoman Edith Ramirez said in a statement. "Even Amazon's own employees recognized the serious problem its process created."

Amazon has said it intends to fight the FTC, noting the company has issued refunds to those who have complained and that more parental controls are available than were required of Apple, which settled a similar case with the FTC in January for $32.5 million.

Amazon started billing for in-app charges in November 2011, according to the FTC lawsuit (PDF). Amazon's app store is include on its Kindle Fire tablets and is available on Android devices. In-app charges can range from 99 cents to nearly $100, the FTC said, and there's no limit to how much someone could ring up.

When children are playing games, the FTC said, children can simply click a box and their parents' credit card will be charged. Parents were not required to authorize the charges, the agency said. Even children said they had no idea they were spending real money, the lawsuit said.

The FTC is seeking a court order to force Amazon to issue refunds and bar the company from in-app charges made without authorization.

In the lawsuit, the FTC cites internal Amazon documents as showing the policy of allowing children to spend money through in-app charges was creating a big problem for the company. A manager in the app store was quoted as saying the situation was "...clearly causing problems for a large percentage of our customers," and describing it as a "near house on fire."

It wasn't until last month, the lawsuit said, that after more than two years of complaints that Amazon started asking for approval in advance among users of newer mobile devices.

Amazon noted that it offers an app called Free Time for its Kindle tablets that allows parents to set limits on how children can use the devices.

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    Mitch Lipka is an award-winning consumer columnist. He was in charge of consumer news for AOL's personal finance site and was a senior editor at Consumer Reports. He was also a reporter for The Philadelphia Inquirer and the South Florida Sun-Sentinel, among other publications.