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FTC suing Amazon over childrens' in-app purchases

Jeff Bezos, CEO of Amazon
Emmanuel Dunand | AFP | Getty Images
Jeff Bezos, CEO of Amazon

The Federal Trade Commission is suing Amazon.com, alleging Amazon unlawfully billed parents millions of dollars for unauthorized purchases in children's apps.

Thousands of parents and other account holders have reported to the FTC that Amazon billed them for charges of up to hundreds of dollars in some cases for purchases children made on Amazon's apps, according to the suit.

The FTC says Amazon often failed to gain informed consent from parents or other account holders for the in-app charges children had incurred.

The retailer did not tell account holders that by entering a password to authorize a purchase, they were essentially allowing children to make unlimited in-app purchases for the next 15 minutes, according to Jessica Rich, director of the FTC's Bureau of Consumer Protection.

Those customers have had a difficult time getting any of that money back.

"The path to seeking a refund has been unclear and rife with deterrents," Rich said on a conference call with reporters.

The suit also says the retailer began billing for in-app charges "well after" media reports surfaced over unauthorized purchases children were making from other app stores.

"Just weeks after Amazon began billing for in-app charges," say court documents filed by the FTC, "consumer complaints about unauthorized charges by children on Amazon's mobile devices reached levels an Amazon Appstore manager described as 'near house on fire.'"

"This case builds on FTC's mission to ensure consumers have same basic protections no matter the technology involved," Rich said.

Amazon responded to the FTC with a letter Thursday afternoon, saying the move was "deeply disappointing."

"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," Amazon said. Noting that it has made an effort to refund any errant purchases made in-app by children, the company said, "In-app purchasing was and remains a new and rapidly evolving segment, and we have consistently improved the customer experience in response to data."

—CNBC.com staff