Amazon accused of illegally billing for kids' gaming purchases

By By James O'Toole
Published On: Jul 10 2014 01:25:33 PM EDT
Updated On: Jul 10 2014 01:57:48 PM EDT
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Damir Loretic/CNN

NEW YORK (CNNMoney) -

Federal regulators announced a lawsuit against Amazon Thursday, accusing the retail giant of illegally charging parents for millions in gaming-related purchases by their kids.

The Federal Trade Commission says Amazon allowed kids to make in-app purchases of virtual items like "coins" and "stars" in Kindle Fire games without their parents' consent, a violation of federal law. Amazon earns 30 percent on all such purchases.

The FTC complaint quotes internal Amazon communications in which employees raised concerns about allowing unlimited in-app charges without requiring a password. One employee said the policy was "clearly causing problems for a large percentage of our customers," calling the situation a "near house on fire."

"Amazon's in-app system allowed children to incur unlimited charges on their parents' accounts without permission," FTC Chairwoman Edith Ramirez said in a statement. "Even Amazon's own employees recognized the serious problem its process created."

The FTC doesn't yet have an estimate for the total unauthorized charges, but said the figure is in the millions of dollars. One woman, for example, told the agency that her daughter had racked up $358.42 in purchases without her knowledge.

The lawsuit seeks full refunds for all those affected.

Amazon did not immediately respond to a request for comment Thursday. The company revised its policy on in-app purchases last month to require consent from account holders, the FTC said.

Apple reached a settlement with the FTC over the same issue in January, agreeing to refund $32.5 million to parents whose kids made unauthorized purchases through iPhone and iPad apps. The company also settled a related class-action suit.

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