FDA and FTC Joint Warning Letters Target Amazon Affiliates Making False COVID-19 ClaimsEarlier this week, federal regulators continued their efforts to combat the spread of products featuring allegedly false and misleading claims that products can diagnose, treat, cure, or prevent COVID-19.  In warning letters issued to CBD Gaze, Alternavita, Musthavemom.com, and Careful Cents LLC, the agencies identify the respective recipients as participants in

As we have previously advised, the Trump Administration is targeting the sale of counterfeit goods on e-commerce platforms. Early this year, the Department of Homeland Security issued its report to the White House on “Combating Trafficking in Counterfeit and Pirated Goods,” in response to which the White House entered its Executive Order aimed at blocking

Amazon AppsYesterday, a federal judge ruled that Amazon is liable for permitting unauthorized in-app purchases incurred by children.  Amazon is the last in a series of actions brought by the FTC against third-party platforms related to kids’ in-app charges (we previously blogged about the other two actions against Apple and Google here and here, which resulted in refunds to consumers totaling over $50 million).

FTC Allegations

The FTC first filed its complaint against Amazon in district court in July 2014, alleging that the billing of parents and other account holders for in-app purchases incurred by children “without having obtained the account holders’ express informed consent” violated Section 5 of the FTC Act.  Many of the apps offering in-app purchases were geared towards children and offered as “free” with no indication of in-app purchases.  These in-app charges generally ranged from $0.99 to $99.99, but could be incurred in unlimited amounts.  The FTC alleged that, while the app developers set the price for apps and in-app purchases, Amazon retained 30% of the revenue from every in-app sale.

In app purchaseThe complaint alleged that when Amazon first introduced in-app charges in November 2011, the default setting initially permitted in-app purchases without a passcode, unless this setting had been enabled by the user in the parental controls.  Following a firestorm of complaints by parents surprised to find these in-app charges, Amazon introduced a password prompt feature for in-app charges of $20 or more in March 2012.  This initial step, however, did not include charges that, in combination, exceeded $20.  In August 2012, the FTC notified Amazon that it was investigating its in-app billing practices.

Amazon began to require password prompts more frequently beginning in February 2013, only if the purchase initiated was over $20, a second in-app purchase was attempted within five minutes of the first, or when parental controls were enabled.  Even so, once a password was entered, in-app purchases were often authorized for the next hour.  Amazon continued to refine its in-app purchase process over the next few months, identifying that “In-App Purchasing” was available on an app’s description page, and adding a password requirement for all first-time in-app purchases, among other things.

The Court’s Order

The FTC moved for summary judgement in February 2016.  In it April 27 order, the court granted the FTC’s summary judgement motion finding that: (1) the FTC applied the proper three-prong legal test for determining unfair business practices (e.g., a substantial injury that is not reasonable to consumers, and not otherwise outweighed by countervailing benefits); (2) the FTC’s witness used to calculate money damages was timely disclosed, even though she was identified after the discovery cut-off date since the FTC made its intentions to seek monetary relief known from the beginning; and (3) Amazon’s business practices around in-app purchases violated Section 5.
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