WASHINGTON - Apple (AAPL) will refund consumers at least $32.5 million to settle a longstanding complaint that the technology company billed U.S. consumers for charges incurred by children buying mobile apps without their parents' consent.
Under the terms of the settlement, announced on Wednesday by the U.S. Federal Trade Commission, Apple also will be required to change its billing practices to ensure it obtains consent from consumers before charging for items sold in mobile apps.
"Whether you're doing business in the mobile arena or the mall down the street, fundamental consumer protections apply," said FTC Chairwoman Edith Ramirez. "You cannot charge consumers for purchases they did not authorize."
In an internal memo to employees, Apple CEO Tim Cook said the company decided to settle rather than risk a long and distracting legal battle because the FTC's proposals aligned with the company's own intended changes.
Ramirez said the commission had logged "tens of thousands of complaints" from consumers over the unauthorized purchases of apps such as Dragon Story and Tiny Zoo Friends.
The FTC complaint alleges that Apple does not inform account holders that entering their password in the company's App Store opens a 15-minute window in which children can incur unlimited charges with no further action from the account holder
"To be clear, the issue is not that Apple opens a 15-minute window for in-app purchases," Ramirez said. "What we challenge is the fact that Apple does not inform users of the existence of the window. When parents enter a password, they do not know the full scope of charges they could incur."
Apple shares showed little response to the news and in midday trading were up 2.4 percent at $556.69, holding onto gains posted earlier.
"Protecting children has been a top priority for the App Store from the very beginning, and Apple is proud to have set the gold standard for online stores by making the App Store a safe place for customers of all ages," said Apple spokesman Steve Dowling.
The Commission vote to accept the consent agreement package was 3-1, with Commissioner Joshua Wright, a Republican, voting no.