Feature Article

July 07, 2014

The FTC Going After Amazon for In-App Purchases

It takes a long time to build customer loyalty, and businesses around the world do everything they can to protect these customers once they have been earned. The value of these customers is even more important as global competitors start providing products and services with more incentives and in some cases better solutions. The cut throat nature of the competition can best be witnessed online, where margins are so low, companies like Amazon has hardly made any profit since its inception. Perhaps that is why it is fighting the Federal Trade Commission (FTC) regarding the in-app purchases made by children on smartphone applications at its app store.

The FTC wants Amazon to enter the settlement regarding an issue which many companies are facing and have faced recently.

In January Apple agreed to change its billing practices by ensuring minors obtain consent from parents before they are able to charge an in-app sale. The company also agreed to pay $32.5 million by refunding customers whose children made these purchases. Granted Amazon doesn't have the same profit margin as Apple and paying millions of dollars will be a blow to its bottom line, but this can be a very bad customer PR problem if the lawsuit drags on and more people become aware of it.

The FTC claims there are thousands of complaints amounting to millions of dollars in unauthorized in-app purchases by children on Amazon devices.

Amazon on the other hand said it has implemented policies that meet or exceed the requirements of the terms which Apple agreed to. The company also said it made refunds to customers that complained about the charges and its app store has notifications, effective parental controls, and real-time notice of every in-app purchase.

The Wall Street Journal reported the FTC wants Amazon to require a password for all purchases, simplify the refund process, and make the notices more prominent so they can be seen easily.

"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," said Andrew DeVore, an Amazon associate general counsel.

For its part, the FTC said Amazon only changed its in-app charging policies last month, and it is pushing the company to refund customers, give up any profits from inappropriate activity, and to compensate for the FTC's costs, this according to Reuters.

The government has time on its side, and the perception it is defending parents from the innocent mistakes their children have made. On the other hand Amazon is going to look bad, no matter how much it believes in its innocence. There are times when you should stand your ground and times when it is best to surrender and move on, and for Amazon settling with the FTC is the best option; before the millions of parents who will be buying toys for the holiday season find any reason to dislike the company.

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