Amazon Ready to Fight FTC on In-app Purchases - Analyst Blog


Giant online retailer, Inc. ( AMZN ) said that it is prepared to go to court against the Federal Trade Commission's ("FTC") charges, as it believes that it has already done plenty to prevent kids from making unauthorized in-app purchases from its devices.

Amazon wrote to the FTC stating that it would not comply with the regulatory agency's demands to exercise more stringent policies that would prevent children from making in-app purchases.  Instead, it is ready to defend itself in court.

The FTC claims that it has received an overwhelming number of complaints regarding unauthorized in-app purchases by children on Amazon devices, which have added up to millions of dollars. It requires Amazon to update some of its policies by making in-app purchases safe with passwords for every purchase, clearer notification of additional charges and easier refund policies.

Purchases of digital goods are the reason behind the success of app stores of Amazon, Apple and Google Inc. ( GOOGL ). These app stores boost usage and sales of smart devices. Since they also have credit card and other user records, there is the need for stringent policies that could protect customers from paying for unauthorized uses, especially by kids.

Amazon faces a potential litigation charge from U.S. regulators, if it refuses to accept the FTC's demand. The FTC can sue Amazon to impose policies, seeking similar settlement terms as it did in case of Apple ( AAPL ) earlier this year.

Apple settled with the FTC by agreeing to repay at least $32.5 million that were to be distributed to customers, whose children made in-app buys without their parents' permission. It also used new App Store safeguards to ensure parental consent while making virtual purchases.

However, unlike Apple, Amazon refuses to bend and said that it already offers intimation of any in-app purchases to customers and immediate notifications to cardholders. It has always reimbursed the money to affected customers. It also asserted that its practices reflected the standards set by the FTC in the Apple settlement.  

Amazon shares currently carry a Zacks Rank #4 (Sell). Akamai Technologies, Inc. ( AKAM ), is a better-ranked stock carrying a Zacks Rank #2 (Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: AMZN , GOOGL , AKAM , AAPL

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