Amazon.com Inc
is fighting U.S. regulators' demands that it pay a penalty over its
policies on purchases made by children on smartphone applications,
according to documents seen by Reuters.
Amazon, the largest
U.S. online retailer, faces a potential lawsuit from the Federal Trade
Commission, which wants the company to enter into a settlement similar
to the one reached with rival
Apple Inc in January.
At
issue are in-app purchases, in which apps that are downloaded for free
onto a smartphone or tablet then charge users for additional services
through registered credit cards. Consumers say that children are
susceptible to the practice, leading to large bills.
In
a draft complaint, the FTC said there have been thousands of complaints
related to millions of dollars in unauthorized in-app charges by
children on Amazon devices. The agency said Amazon only changed its
in-app charging policies last month.
Amazon,
which has built a rapidly growing business around its Kindle mobile
devices and last month unveiled its own smartphone, said in a letter to
the FTC it has already met or exceeded the requirements of Apple's
terms.
"The commission's
unwillingness to depart from the precedent it set with Apple despite our
very different facts leaves us no choice but to defend our approach in
court," Andrew DeVore, an Amazon associate general counsel, said in the
July 1 letter.
Purchases of digital goods -- from extra game lives to special in-game
tools -- are key to the success of tech companies' app stores, which in turn drive usage and mobile device sales.
In
January, Apple agreed to refund customers at least $32.5 million and
change its billing practices to ensure it obtains consent from parents
before charging for in-app spending.
The
FTC is pushing Amazon to refund customers, give up any profits from
inappropriate activity and to compensate for the FTC's costs.
Many
parents who discover the charges and want a refund face "significant
hurdles to doing so," the FTC said in a draft of its complaint, adding
that the process remains unclear, confusing and without clear
instructions for obtaining a refund.
Amazon said it was "deeply disappointing" that weeks of negotiations failed to sway regulators.
In
its letter, Amazon said it refunded customers who complained that their
children made purchases they did not want. The letter said Amazon's app
store included "prominent notice of in-app purchasing, effective
parental controls and real-time notice of every in-app purchase."
The
FTC declined to comment, saying it "is focused on ensuring that
companies comply with the fundamental principle that consumers should
not be made to pay for something they did not authorize."
"Consumers
using mobile devices have the same long-established and fundamental
consumer protections as they would anywhere else," the FTC said.
The
Wall Street Journal first reported the news. The Journal reported that
the FTC said Amazon would need to make notices of in-app purchases more
prominent, require passwords for all purchases and make refunds simpler
and easier.
- REUTERS