Amazon Ordered by US Court to Process Refunds for Children's In-App Purchases

A federal judge on Thursday directed Amazon.com Inc to set up a year-long process to reimburse parents whose children made in-app purchases without permission, but rejected a US regulator's request for a $26.5 million lump-sum payout.

US District Judge John Coughenour, in Amazon's hometown of Seattle, issued his order more than six months after finding the online retailer liable, in a case brought by the Federal Trade Commission.

The FTC in July 2014 accused Amazon of making it too easy for children to run up bills while playing games such as "Pet Shop Story" and "Ice Age Village" on mobile devices, resulting in an estimated $86 million (roughly Rs. 578 crores) of unauthorized charges.

Thursday's order calls for Amazon to set up a notice-and-claims process beginning in early 2017 to alert parents of their eligibility for refunds, and then to reimburse them.

Coughenour said this approach "removes the uncertainty of the proper lump sum amount that the parties have vigorously disputed. Moreover, it accomplishes the goals of placing liability on Amazon and refunding eligible customers."

Coughenour called the FTC's $26.5 million (roughly Rs. 178 crores) damages request "too high," agreeing with Amazon that it might have taken into account failed password attempts unrelated to unauthorized purchases by children.

But the judge rejected Amazon's request to issue refunds in the form of gift cards, saying the company would "undoubtedly recapture some of the profits that are at issue."

Neither Amazon nor the FTC immediately responded to requests for comment.

The FTC in 2014 settled similar cases against Apple Inc and Google Inc, now part of Alphabet Inc , with Apple agreeing to refund at least $32.5 million and Google at least $19 million.

All three companies have improved their password and other controls to help thwart unauthorized charges.

© Thomson Reuters 2016