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Sharp Disagreement Among FTC Commissioners Extracting $32.5M from Apple

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The Federal Trade Commission proudly announced yesterday that it had caught Apple off guard by slapping the company with a consent decree in which it is forced to reimburse parents for the costs of accidental in-app purchases by their children. But, as it turns out, not all members of the FTC agree that they have done the right thing by extracting $32.5 million from Apple (via Fortune).

You may recall that FTC Chairwoman Edith Ramirez called the Apple-FTC settlement a victory for “consumers harmed by Apple’s unfair billing.” Back in 2011, the iPhone maker was accused by angry parents whose kids racked up huge bills from in-app purchases of letting them spend money without their parents’ consent.

Apple settled the lawsuit with the parents last year.

In a memo sent to employees, Tim Cook highlighted that Apple had already settled this case and contacted affected parents. But as the FTC threatened Apple with another lawsuit, Cook agreed to settle instead of going to court. So Apple agreed to pay $32.5 million to the parents, which is roughly $880 per case.

But Joshua Wright, FTC commissioner and former George Mason professor of law, made public that he doesn’t agree with the punishment, as it has no foundation.

“The test the Commission uses to evaluate whether an unfair act or practice is unfair used to be different,” he writes. “[Those] cases invariably involve conduct where the defendant has intentionally obscured the fact that consumers would be billed. Many of these cases involve unauthorized billing or cramming – the outright fraudulent use of payment information. Other cases involve conduct just shy of complete fraud – the consumer may have agreed to one transaction but the defendant charges the consumer for additional, improperly disclosed items.”

“This is a case involving a miniscule percentage of consumers – the parents of children who made purchases ostensibly without their authorization or knowledge. There is no disagreement that the overwhelming majority of consumers use the very same mechanism to make purchases and that those charges are properly authorized. The injury in this case is limited to an extremely small – and arguably, diminishing – subset of consumers.”

It may be a victory for the FTC, which, in the end, will receive any money that’s not spent.

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