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Apple coughs up 7 hours of profit to refund kids' $32.5m app spend spree

Don't charge for in-software purchases people did not authorize, huffs FTC

Internet Security Threat Report 2014

American parents whose children ran up huge bills from in-app purchases on Apple devices will be refunded $32.5m by the Cupertino titan.

The settlement was brokered by the US Federal Trade Commission (FTC) after youngsters were able to buy heaps of useless stuff in software – such as power-ups in games – without their guardians' full permission.

Apple's billing practices were branded unfair by the consumer watchdog after tens of thousands of users complained. The FTC said Apple hadn't made it clear how the parental controls on devices limited the spending of money in apps – a mechanism regulated by Apple's App Store so it can take a cut of any transactions.

In some cases, a parent could authorize a child's in-app purchase, which was charged to the adult's credit card, and not realize that for the next 15 minutes, further purchases could be made without parental intervention – giving the kid a large window of time to buy plenty of expensive stuff.

"This settlement is a victory for consumers harmed by Apple’s unfair billing, and a signal to the business community: whether you’re doing business in the mobile arena or the mall down the street, fundamental consumer protections apply,” Edith Ramirez, chairwoman for the FTC, said today in a statement.

"You cannot charge consumers for purchases they did not authorize."

Under the terms of the deal, Apple will provide full refunds to customers for charges ranging from 99 cent purchases to $99.99 in-app payments. The company will also change its billing and notification policies to better inform parents of when and how their accounts can be charged for in-app transactions.

The $32.5m settlement will not hamstring Apple (net income last year: $37bn). Based on the company's financial figures for the year to October 2013, the company raked in sales of $170.9bn. So today's refund payout is worth about 6,000 seconds of Apple's time in terms of annual revenue, or about an hour and forty minutes. Or 7.6 hours of annual profit.

Compared to the performance of the App Store, which by itself generated $1bn in software revenues last month, the $32.5m payout adds up to about one day's haul. Apple has yet to respond to a request for comment on the matter. ®

Internet Security Threat Report 2014

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