Apple to Refund Customers $32.5M Over Unauthorized In-App Purchase Complaints

Apple has already settled the unauthorized use of in-app purchases lawsuit, offering iTunes credits and refunds to parents. But this seems like it wasn’t enough for the Federal Trade Commission, who threatened a second lawsuit. So, finally, today Apple has agreed to sign a consent decree with the regulator.

It doesn’t feel right for the FTC to sue over a case that had already been settled. To us, it smacked of double jeopardy. However, the consent decree the FTC proposed does not require us to do anything we weren’t already going to do, so we decided to accept it rather than take on a long and distracting legal fight.

In a memo sent out to employees and obtained by Re/Code, Tim Cook says the company has agreed a settlement with the FTC instead of engaging in a long legal battle, even though “it doesn’t feel right”, as he wrote.

Last year, we set out to refund any in-app purchase which may have been made without a parent’s permission. We wanted to reach every customer who might have been affected, so we sent emails to 28 million App Store customers – anyone who had made an in-app purchase in a game designed for kids. When some emails bounced, we mailed the parents postcards. In all, we received 37,000 claims and we will be reimbursing each one as promised.

Parents whose children racked up credit card charges on apps that were supposed to be free filed a lawsuit against Apple in 2011. The company first tried to block the case, but the judge found that parents suffered sufficient harm to pursue the case.

A couple days before Apple announced the settlement over unauthorized use of in-app purchases last year, the Federal Trade Commission agreed to take a look at Apple’s in-app purchasing mechanism, as complaints that children were able to spend hundreds of dollars through “freemiums” continued to rise.

“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,” said FTC Chairwoman Edith Ramirez. “You cannot charge consumers for purchases they did not authorize.”

Under the new terms Apple will need to modify its billing practices to make sure that it obtains “consumers’ express, informed consent prior to billing them for in-app charges”, and that if the company gets consumers’ consent for future charges, consumers must have the option to withdraw their consent at any time. Apple must make these changes no later than March 31, 2014.