Giant online retailer,
) has been sued by the Federal Trade Commission ("FTC") for
allowing unauthorized in-app purchases by children on Amazon
The FTC has filed the suit in Washington's District Court,
presenting the details of an overwhelming number of complaints from
parents for unauthorized virtual goods purchases from Amazon's
Appstore that have cost them up to hundreds of dollars.
The FTC is seeking a ban on Amazon for unlawfully billing parents
for the unauthorized in-app purchases without their consent. It
also seeks a refund to the affected customers.
The lawsuit was filed after Amazon refused to comply with the FTC's
proposed settlement terms under which it asked the company 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.
Amazon had also written 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. Amazon said that it is prepared to defend its
policies in court as it believes that it has already done plenty to
prevent kids from making unauthorized in-app purchases from its
Amazon also said that it intimates customers about in-app purchases
and sends immediate notifications to cardholders. It has always
reimbursed the money to affected customers. Amazon had also updated
its in-app charge process in June to get permission from account
holders for purchases on mobile devices. It also asserted that its
practices reflect the standards set by the FTC in the
Earlier this year, the FTC had sued Apple over similar
concerns. However, unlike Amazon, Apple reluctantly settled
with the FTC by agreeing to repay at least $32.5 million that was
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 of digital goods are the reason behind the success of app
stores of Amazon, Apple and
). These app stores boost usage and sales of smart devices. Since
they also have credit card and other user records, there is a need
for stringent policies that could protect customers from paying for
unauthorized uses, especially by kids.
Moreover, in-app purchases have turned out to be important sources
of revenue for mobile developers who offer their applications for
free download. Amazon gets a 30% commission from in-app purchases.
Therefore, if found guilty, it can adversely affect the company's
revenues in the future.
Amazon shares currently carry a Zacks Rank #5 (Strong Sell).
PetMed Express, Inc.
), is a better-ranked stock carrying a Zacks Rank #2 (Buy).
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