In app purchases by kids go wrong for Amazon

In App PurchasesIn July 2014, the FTC filed a lawsuit against Amazon, Inc. alleging the when Amazon first introduced in app charges to the Amazon Appstore in November of 2011, there were no password requirements for in app purchases, including in kids’ games and other apps that appeal to children. According to the complaint, this left parents to foot the bill for charges they didn’t authorize.

“Amazon’s in app system allowed children to incur unlimited charges on their parents’ accounts without permission,” said FTC Chairwoman Edith Ramirez. “Even Amazon’s own employees recognized the serious problem its process created. We are seeking refunds for affected parents and a court order to ensure that Amazon gets parents’ consent for in app purchases.”

FTC Takes Issue With Amazon’s In App Purchases

The FTC’s lawsuit against Amazon sought a court order requiring Amazon to provide refunds to consumers for the unauthorized charges and a permanent ban against Amazon’s practices of billing parents and other account holders for in app purchases without their consent.  At the time of the complaint against Amazon, the action against Amazon represented the second action regarding in app purchases.  The other in app purchase action was pursued against Apple, Inc., which ultimately settled with the FTC in 2014.  Also in 2014, Google settled a similar case with the FTC regarding in app purchases.

Federal Judge Grants Summary Judgment Against Amazon

Now, in late April, 2016, a federal judge issued an order granting summary judgment against Amazon over its in app purchases.  The court’s order found that Amazon received a number of complaints from consumers about unconsented in app charges incurred by the consumers’ children.  The complaints said that Amazon’s disclosures about the possibility of in app charges within otherwise “free” apps were not sufficient to inform consumers about the charges.

“The millions of dollars billed to Amazon customers without a mechanism for consent, the thousands of customers complaining about unauthorized charges, and the time spent seeking refunds for those charges, all demonstrate substantial injury,” wrote U.S. district judge John Coughenour in Washington state.

“It is Amazon’s stated policy that in app purchases are final and nonrefundable, likely discouraging much of its customer base from attempting to seek refunds.”

The judge also noted that 1,573 customers who sought refunds did not receive them.

Judges Asks for More Information Regarding Damages

While the court ruled against Amazon’s in app purchases, the court did not fashion an immediate remedy.  Instead, the court requested more information from the FTC and Amazon regarding how much money Amazon owes to consumers over the in app purchases.  The FTC has said it will push hard for full refunds for those impacted by Amazon’s unconsented in app purchases.  FTC data analyst Julie Miller estimates that Amazon made approximately $86 million from the in app purchases, but that only $10 million had been refunded to consumers.  However, the judge said that Amazon has called Miller’s estimates “fundamentally flawed.”

The judge’s opinion also stated that Amazon’s strategy was no accident.  According to the court’s opinion, when Amazon developed the Kindle Fire Tablet, Amazon targeted “soccer parents” as a key customer base, describing them as “low-hanging fruit.”  In fact, in a marketing document regarding in app purchases, Amazon purportedly admitted it was aware that children were spending their parents’ real money on in app purchases without their parents’ knowledge.  “As one Amazon employee explained, ‘If a parent gives the device to a child and the child is playing the game and they – they just decide, you know, outside of the parent’s view or whatever, to purchase, they could do that,’” Judge Coughenour wrote.

Redacted Portions of Court’s Opinion Become Public

Even though the amount of damages Amazon will have to pay is still undetermined, the fact that we know the entirety of the judge’s opinion is somewhat of a fluke.  Since the opinion first became public last week, there have been rumors that the redacted portions of the opinion disappeared when the order’s text is pasted into a Microsoft Word document.  However, once it became known that the redactions could be viewed publicly, the court pulled the redacted opinion from the court’s electronic docket.

According to an article from Reuters:

I [the article’s author] could not ascertain who decided what to black out in Judge Coughenour’s opinion. I emailed FTC counsel, Amazon lawyers from Venable and Perkins Coie and Judge Coughenour’s courtroom deputy to ask; I heard back only from J. Douglas Baldridge of Venable, who declined to comment.

At or near the outset of the case, Amazon and the FTC jointly proposed a protective order to keep certain discovery documents confidential and under seal.  That protective order has been in place since January 2015.  When the opposing sides filed their motions for summary judgment, both Amazon and the FTC asked the court to keep certain accompanying exhibits confidential.  Both the FTC’s and Amazon’s requests were at the behest of Amazon.  In fact, the FTC agreed that certain internal Amazon memos should be confidential, filing those memos under seal as part of its own exhibits.

The confidential nature of the case has been recognized by Judge Coughenour, whose sealing orders duly noted the presumption of public access but nevertheless granted the Amazon and FTC confidentiality motions. Corporate “strategic planning and financial information,” he said, is “of a sensitive enough nature that it outweighs the de minimus public interest in access.”

Are Lawsuits Becoming Too Private?

The judge’s sealing orders and eventual redaction snafu pose the question of whether and to what extent lawsuits should be public.  Generally, our country’s justice system is presumed to be open to the public, but in a great number of instances that is not the case.  The biggest area of secrecy in our court system appears to involve litigation between businesses and/or or between business and government.  In a great number of instances, no one challenges this secretive conduct, and, as a result, the secrecy is allowed to continue.

It is easy to understand that companies do not want their trade secrets made public, or that they want to keep under wraps other traditional areas of privacy, i.e., attorney client communications or attorney work product.  However, these narrow types of confidentiality are becoming a rare occurrence.  Instead, more and more, litigants are seeking to put in place blanket protective orders, which make any and all documents confidential in a given case.  This practice seems contrary to our notions of open access to the courts.  However, this is not to suggest that protective orders and confidentiality do not have their place, because they do.  But, that protection must not be on a blanket basis, or upon concerns that bad things may be revealed about a company’s conduct.

What is even more troubling is the fact that the government, akin to the FTC in the case against Amazon, acquiesces in that secretive nature, and themselves files documents under seal and hidden from the public view.  The justice system is meant to be mostly transparent, and should not be shielded from public view just because it may reveal some less than favorable things about its litigants.

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