Relevant to Recent Discussions

FTC alleges Amazon unlawfully billed parents for millions of dollars in children’s unauthorized In-App charges.

To quote myself: “[B]usinesses and corporations are not your friends. They will seek to extract the maximum benefit from you that they can, and from others with whom they engage in business, consistent with their current set of business goals. This does not make them evil — it makes them business entities (they might also be evil, or might not be, but that’s a different thing).”

Note that Amazon can and may fight this in court. Alternately, it may choose to settle out of court, admitting no wrong, and change its in-app policies consistent to what the FTC wants from them. Which will it choose? I expect whichever one is (all together now) consistent with its current set of business goals.


50 Comments on “Relevant to Recent Discussions”

  1. For those who will take this as proof I am anti-Amazon (and pro-publisher, etc):

    No. I do think it shows that Amazon is pro-Amazon, and tends to be in most circumstances, even sometimes allegedly at the expense of the consumer. Mind you, I expect Amazon to be pro-Amazon most of the time, as I expect any corporation to be for its own interests, even when those interests may (in this case) tread the boundaries of what is lawful. Like raptors testing the fences, corporations are.

    Something to keep in mind when you are thinking about corporations and businesses, and how they see you, either as a customer, or a vendor.

  2. My first response was knee-jerk support for Amazon, but I stopped to read the filing before posting such, and based on that it seems Amazon went out of their way to set up a system that would let kids charge things without parent’s approval. I hope the doers get sacked, and I hope Bezos and Amazon are going to do better in the future, but we’ll just have to wait and see…

  3. I’ll be happy in 20 years or so when all parents are hip to the concept of safeguarding their devices from this kind of stuff via multiple user profiles, so we stop seeing headlines like this.

    I’ve just opened myself up to a big ole karma smack when my daughter reaches device-using age, haven’t I?

  4. They purposely set the limit at $20, because parents will be less upset? Most of these games have several packages under $20 and $20 a day can rack up pretty quickly. I know they are in the business of making money, but this was an incredibly stupid decision. Even TV ads say purchasers must be over 18. Minors can’t enter into binding contracts without parental or guardian permission in most cases.

  5. Amazon will lose this one. Children cannot be a party to a contract, so their spending on their own account can be undone by any court. Now, if they buried fine print in an authorization contract that the parent agreed to before the child could play the app that said the parent was legally liable for the child’s charges and debt, they might secure a victory. Depends on what the parent signed to (even if unread by the parent at the time). But even if Amazon did that with fine print in a contract for parents upfront, does this practice not smell of oppression of the young, as we all know most adult people just click yes to the agree to terms icon and move on without ever reading any print fine or otherwise.

  6. Ever since my kids have had Kindle Fires, there has been an option to disable in-app purchases, and to disable any purchase without a password. I’ve even had Amazon refund some in-app purchases before. My experience doesn’t mean the complaint isn’t justified, but I’ve had absolutely no issue with this.

  7. The FTC already (successfully) slapped Apple around for the same thing. I’m betting they’ll win against Amazon too. (Note that Amazon changed their practices days before the suit was filed. That’s not quite an admission of guilt, but…

    A couple of big, high-profile wins will help keep smaller sellers in line.

  8. Apple was sued for the same thing, and settled with the FTC at the beginning of the year for 32.5 million dollars.

    My daughter has a kindle fire, we bought it specifically because we could disable those things we did not want her to use and enabled a password for app purchases. Haven’t had any issues since we bought it.

  9. In regards to the use of passwords to keep your money safe, the linked article says ‘The complaint alleges that in early 2013, Amazon updated its in-app charge process to require password entry for some charges in a way that functioned differently in different contexts. According to the complaint, even when a parent was prompted for a password to authorize a single in-app charge made by a child, that single authorization often opened an undisclosed window of 15 minutes to an hour during which the child could then make unlimited charges without further authorization.’ And they only changed that in June. So, y’know. Maybe it wasn’t all that great.

    (The linked article also says that ‘The Commission is seeking … disgorgement of Amazon’s ill-gotten gain,’ which is either the most awesome technical legal language ever or proof that someone at the FTC is a big Spirited Away fan.)

    But really, I call baloney. Sure it’s millions of dollars in refunds, but Amazon is a $100 billion company. It wouldn’t be ‘suicide’. They can afford it.

  10. But John, Amazon is our friend! /sarcasm/

    More meta – this whole Amazon vs. Hachette war has amazed me to see the lengths to which people will go to divide the world into “us” and “them.” I’m also amazed at how these divisions get made. I’m reasonably sure that had you expressed some support for Amazon, various parties on the Internet would have suddenly found nice things to say about Hachette.

  11. I have to disagree with the contention that corporations aren’t evil, unless you’re making a purely formal logical statement (in which case one exception will falsify the claim) rather than a generalization.

    Certainly the concept of a corporation doesn’t entail evilness. Separating economic responsibility from the creators of a business isn’t itself evil. But at least for public corporations, once you make the primary legal (and perceived ethical) obligation of a corporation a fiduciary responsibility to shareholders and you remove any significant legal or financial penalties, you end up, as we have, with a set of corporations that seek profit without any regard to public harm. People, environment, society – not as important as the bottom line. And always in conflict with the bottom line as well.

    If I rip off someone for a thousand dollars, I’ll go to jail. Ignoring the fact that as an individual person I possess empathy, even a psychopath doesn’t want to go to jail. If a corporation rips people off at a thousand dollars a pop, the absolute worst case for them is having to pay back that money and pay a minor (compared to their bottom line) fine. The more normal case is that they’ll get caught sometimes, but they won’t often enough that they’ll keep doing it because it is, in the whole, a profit stream. For the same reason they pollute at 99% of what they are allowed, or just ignore the regulation entirely if the fines involved aren’t substantial enough. Which mostly they aren’t. Not only is TEPCO still in business, they were given a trillion yen two years ago by the Japanese government. We bail out GM, they sold *how many* cars that their internal memos had to censor out the words “rolling deathtrap from.” And what exactly is the level of diversity at Google, who is, of course, explicitly *not* evil.

  12. Crystal Shepard:

    This previous discussion of corporations and whether or not they are sociopathic may be of interest to you.

    One thing I think that is possible — and worth the argument having about — is that corporations get off far more easily for their various crimes and rulebreakings than natural persons.

    Chris Gerrib:

    “I’m reasonably sure that had you expressed some support for Amazon, various parties on the Internet would have suddenly found nice things to say about Hachette.”

    As I noted earlier on Twitter today, if I expressed support for oxygen, there would be people online who would opine that oxygen was for losers.

  13. Personally I think the charges ought to have been allowed to stand. If parents don’t want their kids racking up charges, then they ought to supervise them more closely. A surprise bill for thousands of dollars is just the world’s way of saying you aren’t enough attention to your kids.

  14. In this case, “supervise them more closely” would require either not allowing them to have a Kindle at all, or watching over their shoulders at all times they are using the device. Is that really what you mean?

  15. Cryptic, I have enjoyed many of your comments and insights over the years, but your statement here is utterly ridiculous. As UC states, are you suggesting that they are not allowed to use a Kindle at all? Or that I should always be over their shoulder? I have 4 kids, and I’m fairly certain that its mathematically impossible for my wife and I to police everything they ever do on an electronic device. Now ours are set up with passwords necessary for every purchase, but I can easily understand the issue occurring, and stating that the parents aren’t doing their job because the app developers and Amazon took advantage of kids is just looney tunes.

  16. I’ll be honest, yes, I’d be fine with that. Give children real books or games that are automatically internet connected if you feel you cannot watch the children at that moment. An internet connected electronic device is not essential to anyone’s childhood. It is something that should only be given to a child during the times they can be adequately supervised. The first and last line of internet security for children is the parents. Amazon may or may not have taken advantage of poor supervision, and overly generous parents, but without that lapse by the parents they wouldn’t have got a single penny.

  17. As I noted earlier on Twitter today, if I expressed support for oxygen, there would be people online who would opine that oxygen was for losers.

    I double dare you to do it.

  18. games that are automatically internet connected

    I meant “games that are *not* automatically internet connected”. Ah, dammit.

  19. Given that Amazon saw Apple get smacked around for this and did nothing doesn’t look good to me.

    Either they weren’t paying attention to what one of the largest competitors was doing (doubtful), or they figured they would skate by until someone started paying attention to them, and then pay a fine later. Obviously there could be more things that happened, but given that John Rogers describes fines as a cost of doing business (he was the head writer of Leverage) I am leaning towards the latter.

  20. Put me down with cryptomirror – if you are giving your kids license to spend money on your behalf, and are not monitoring it, it’s not just the kids that need a wake up lesson.

    Better that the kids understand “consequences come from actions” BEFORE they get access to your car and your (entire) credit card.

    Yes, I see that Amazon might lose this one. I don’t agree, and I think it teaches us the adults that someone will always bail us out.

  21. The issue is that Amazon is making it difficult to let you give your kid their device without automatically giving said kid a license to spend money on your behalf.

    It doesn’t have to be that way. My company sells a very popular Internet connected device that kids can use to play games, and we give parents the ability to fully control child purchases, either restricting them entirely, or setting monthly dollar limits. That’s the way it should be. Parents are certainly bound to monitor their kids, but Amazon should be castigated for the likely deliberate attempt to make such monitoring hard for more profit.

  22. As I noted earlier on Twitter today, if I expressed support for oxygen, there would be people online who would opine that oxygen was for losers.

    I double dare you to do it.

    I TRIPLE DOG DARE YOU to do it!

  23. First, I don’t think you are anti-amazon. That would be amazingly stupid on your part.
    I love Amazon, they are easy, quick and cheap. I do not have to drive across town, wait in line and then deal with some dude who think he has a witty t-shirt on.
    No, I do not think Amazon is my friend but they know they have to be compelling on several fronts in order to get my business.
    As for kids, there are already built in controls to prevent this from happening. Can’t fix stupid on the part of parents who do not employ them.

  24. I’m wondering if anyone harrumphing about those dang lazy parents bothered to read FTC’s release at Scalzi’s link, and by “wondering” I mean “extremely doubtful”.

    This was not, as some seem to be assuming, a case of parents failing to notice that their kid hit the ‘buy’ button because they simply weren’t paying enough attention. The FTC alleges that on top of the lack of any parental control passwords on a game intended for and marketed to children, Amazon obscured when items were being bought with in-game play money vs. when real money was used, for example; that when there were complaints, they instituted a half-assed (and IMO deliberately deceptive) password system that didn’t require confirmation of small frequent charges, and which failed to tell parents that if they OKd an individual purchase, they were actually OKing any and all purchases for the next 15 minutes. Also, that when parents tried to contact Amazon about problems with in-app purchases, that the process was extremely obscure and misleading.

    Oh, and that Amazon knew about these problems and reacted to them with ineffectual and misleading steps that didn’t strongly interfere with their ability to collect in-app purchases that weren’t intended.

    Admittedly, I also don’t understand the mentality that a company that behaves badly or dishonestly should be excused and forgiven as long as we think the people it ripped off are sufficiently stupid.

  25. So what? Apple did something like this. Recently, Facebook got busted for conducting evil psyop experiments. Of course people and corporations are going to look out for their best interests. That’s why you have a bunch of trad pub writers supporting Hachette and a bunch of indie writers supporting Amazon.
    I know that some are going to counter that this means that Amazon will change their KDP terms later to increase their profit margins. Probably, but what companies don’t want to increase their profit margins? The Big FIve sure do. HarperCollins was recently happy with their ebook profit margins.
    Plus, business opportunities don’t last forever. The cowboy era only lasted twenty years. The California Gold Rush only lasted for seven. Right now Amazon is offering good terms to self pup writers thus many of them are going to support Amazon right now.
    That doesn’t mean that being a trad pub writer is bad. Both self-pup superstars Howey and Sullivan have stated that they make more money from trad pub than from self-pub and obviously you do well for yourself.

  26. So what? Apple did something like this.

    As noted in the FTC release: “This is the Commission’s second case relating to children’s in-app purchases; Apple, Inc. settled an FTC complaint concerning the issue earlier this year.”

    Which is, again, simply evidence that Amazon is neither uniquely evil nor Good Guys Because They Ship My Stuff Fast; they’re a company in the business of making money, period. As is Hatchette.

  27. @mythago Did amazon actually have anything to do with the app design? I mean they definitely should have had password controls or something to block the purchases (although a quick google shows a 2011 article mentioning the ability to disable in-app purchases? If that was a feature since the first kindle fire you’d think the parents would have used it after the first accidental purchase) but the app itself and it’s ambiguity over whether you’re spending real or game currency is probably more the devs than amazon unless the app is different from the android and ios versions.

    Honestly, it’s not the initial flaw that bothers me, it’s the adding the password requirement for anything over $20. If they could add that they could have added it for any amount. The steps they took and the amount of time it took to correct it is just ridiculous.

  28. But to many people Amazon are “Good Guys Because They Ship My Stuff Fast.” To some writers Amazon is Evil, to others Amazon’s their hero.
    Amazon and Hachette are obviously looking out for their best interest. So are writers and consumers.
    From what I understand Amazon was forced to agree to agency during their dispute with McMillan because their customers were complaining they could not get the books they wanted. That’s why Preston called for people to complain directly to Bezos.
    A company is not evil or bad or an enemy until they are. In this case, when they mess with your money or prevent you from getting the product you want.
    Saying Amazon is neither evil or your friend is pointless. Its ignoring what many people are feeling even though they have made it clear.

  29. @Mai, the FTC press release refers to apps sold through Amazon’s app store. The complaint itself (linked to in the press release; direct link here) at paragraphs 10 and 12 says that Amazon sells these apps for the Kindle, reviews and categorizes them before putting them on its app store, and takes 30% of the proceeds from the app’s sales and in-app purchases.

    Whether the FTC is correct that this violates various laws, I don’t know and honestly don’t have much interest in researching – but it does not appear to be a case of apps slipping in stuff that Amazon didn’t and couldn’t know about.

  30. @mythago and @Mai: They’ve got a system for essentially giving the app developer access to your Amazon account when you make purchases in the app. To underline the points mythago made, if a company is allowing themselves to funnel money from their consumers to a third party without understanding that’s what’s happening, that in my mind is at the very least gross incompetence. I don’t remotely think Amazon is grossly incompetent.

    I do think they went through the same thought process those on here who blame parents went through. I can definitely see seeking to save money by calling that 15 minute window good enough, and obscuring the complaint process to avoid giving the impression complaints are common, then justifying that decision with an attitude of “if they’re dumb enough to let it happen, they deserve what they get.” Leaving aside judgments of good or evil, I don’t particularly have warm feelings for vendors who’s attitude is “let’s bleed the suckers, and screw ’em if they squeal.”

  31. I get that people think that Amazon should have allowed more transparent blocking of purchases. That Amazon did not is a legit complaint. My point is more along the lines of when you tell your kids to not buy things on the app, they should not buy things on the app. If the kids fail to comply, they lose access to the tool/toy. Making it physically impossible for them to make a bad decision does not, in fact, teach them to make good decisions.

    No matter how much we dislike it, we live in a world full of enticing ads. Learning to filter these is an important part of reaching adulthood. Elsewise we end up in a world full of consumers with no impulse control.

    If we were talking edged weapons, firearms, or matches, I’d be more (but not completely) sympathetic to the idea that absolute control is needed. As this is purchases from a kindle game device, I’m not really impressed.

  32. I’m afraid I don’t get it. Other than it only being $120, the big reason we got the Kindle instead of another tablet was the “free time” controls. You can block anything including in-app purchases.

  33. My point is more along the lines of when you tell your kids to not buy things on the app, they should not buy things on the app

    A point which has nothing whatsoever to do with the FTC’s charges.

    The FTC is not complaining about “enticing ads” or disobedient children. As both the press release and the complaint say very clearly, the allegation is that these apps were designed to deceive both the kids and their parents so that they were unaware they were in fact buying things on the app; and that Amazon knew about this problem, but was (at best) ineffectual in trying to fix it, and maybe not all that interested in fixing it, since they received a 30% cut of every purchase.

    In short, the FTC is claiming that Amazon profited by selling apps which deceived and cheated customers, and then dragged its feet about fixing the problem – and in doing so, violated the law. This is all laid out pretty clearly in the press release and in the complaint.

    Also, you know, it’s not an enforcement agency’s job to say “yes, this company violated the law, but kids these days, why, they’re just coddled, so fuck’m.”

  34. @ keranih July 11, 2014 at 9:38 am

    Let me attempt to paraphrase your opinion to make sure I understand what you mean.

    Is your opinion that it is more important, ethically and pragmatically in order to work towards bettering our society, to teach parents and their children to not be suckers than it is to teach adult liars, cheaters and stealers not to do those things?

    If so, why? Because there will always be liars, cheaters and stealers and nothing can be done about that? Or because it is OK to be a liar, cheater and stealer, at least in the pursuit of money, but not okay to be a sucker or just plain inexperienced?

    In any case it is clear that you are saying that the liars, cheaters and stealers in this particular situation should not be held accountable, and that the people they cheated should just deal with it. Presumably because you feel the market should be left to its own devices, and that this wasn’t lying cheating or stealing, just business?

  35. I’m reading the nonfiction comic book Economix, and it does a great job illustrating that corporations are not your kindly friends now and in the past running back to Adam Smith.

  36. @darrelle – No, that is not a fair approximation of what I said. In particular, I think it’s rather disingenious of you to say that I’m okay with people being cheats and liars, or that liars and cheats should not be held accountable.

    But it is not clear at all to me that lying and cheating were going on. To me, it seems fairly straight forward – the game is going to try to get you to spend money – the entertainment wasn’t developed out of the goodness of their hearts. A parent who is not on the lookout for that is doing themselves and their kid a severe diservice.

    @mythago – you said these apps were designed to deceive both the kids and their parents so that they were unaware they were in fact buying things on the app

    Not from the descriptions sited – those were clearly two different kinds of transactions.

    The parents were not clear on the idea that you could spend the money in your account, but in order to get more in the account you needed to pay for the “loan”?

    And these apps were…unable to be removed from the machine?

    Sorry, I’m both losing sympathy with people who don’t investigate things before handing them to their childern to play with, and losing tolerance for folks who expect the world to come pre-padded for their safety.

  37. @smhll –

    corporations are not your kindly friends now and in the past

    Neither is the small business owner, the butcher, the baker, or the candlestick maker. Neither is the guy who invented the horseless carriage, the small farmer, or the buggy whip maker.

  38. Regarding oxygen, while I respect your right to support it, I think it is entirely too good at keeping us alive. It is holding our lungs hostage. The government should intervene and require oxygen to also carry around argon and carbon molecules. And it should probably break the element of oxygen down into a group of more-easily managed elements. Just wait until oxygen starts charging you 70% of your income to allow you to be alive. Then you’ll be sorry.

  39. keranih,

    Disingenuous? Not at all. I am taking you at your written word, and using previous experience of similar circumstances to inform my interpretation. And I straight forwardly asked you.

    If you don’t think there is lying cheating or stealing going on here, if the charges are shown to be accurate (which is what we are talking about), the only reasonable assumptions are that you don’t understand what the charges are, or that your values are quite different. Even different values wouldn’t quite cover it since lying, cheating and stealing are far from being purely subjective phenomena.

  40. Folks, this is where I step in and remind you to remember to be polite and considerate of each other. You’re doing fine so far but I see places where people could fall off the wagon, as it were.

  41. I realize that this is a minority opinion (especially since the financial meltdown of 2008), but I feel it should at least be mentioned in the discussion: The way employees, vendors and customers feel about a corporation factors in to the calculation of “maximum benefit.” If Amazon did intentionally deceive its customers and/or their children, they will pay for it with more than fines and other government-imposed judgments. They will also pay for it in lost revenue, lost good will, and lost reptuation – likely for a long time. Comparing the profits a corporation makes from bad/illegal behavior against only their legally imposed financial penalties is ignoring the rest of the equation (often for the purposes of defending the foregone conclusion that the corporation is “evil”).

    While I’m at it: most corporations do more than extract benefit from their employees, vendors and customers. They also provide benefit to these groups. Leaving aside bad/illegal behavior for a second (most corporate behavior is, after all, not bad or illegal), most corporations make money by providing goods and/or services to their voluntary customers. It has, in my humble opinion, become much too much in vogue to declare the practice of charging for these goods and services to be evil – akin to taking advantage of the poor sucker who puts his/her money directly into the pocket of a nameless, faceless CEO.

    If I like the movie, I’m fine with the studio getting rich from my ticket purchase. If the mortgage allows me to buy my house, I’m fine with the bank getting rich from my interest payments. If either company treats me poorly, they may or may not face government punishment, but they will lose my future revenue stream to a competitor, as well they should.

  42. Amazon is pretty much a salt mine, and somewhat bizarre internally. I’ve had at least half a dozen interviews there and always came out feeling somewhat dirty. A guy who works in a billion dollar corporation with tens of thousands of employees will look you right in the eye and say “We’re just like a small company.” I’ve worked in small companies my entire career. This ain’t it. But he honestly believes it, which is kind of creepy I think.

    They do ship my stuff fast, though. Except for this new fly line I’ve been waiting over a week for. That’s annoying.

    / Got nuthin’

  43. I expect that Amazon will decide which alternative is likely to cost them less money and has less government oversight (which also costs money) and do that.The main reason why companies settle out of court without admitting guilt is that if they were to admit guilt it would leave them open to a huge number of (often bogus) civil suits or class action lawsuits.

  44. @keranih, I genuinely don’t understand what you are trying to say, with your comments about a ‘loan’ and about deleting apps after the money was already taken; they appear to have nothing to do with the alleged conduct. I can’t be any clearer than pointing to the FTC complaint, which alleges that the app was deceptive about whether the user was actually agreeing to spend money in-app, and how; that Amazon, despite being aware of those problems, was repeatedly slow to fix them and did a half-assed job of doing so (possibly because of that nice 30% cut); and that these actions violated certain laws.

    @darrelle: Conversations like this always remind me of a cautionary tale from an acquaintance who handles medical malpractice cases. He was picking a jury in a case where the alleged malpractice happened during surgery while the plaintiff was under full anesthesia. So he asked the potential jurors if anyone thought maybe the plaintiff was to blame, and was surprised when one woman’s hand shot up. When he asked, somewhat baffled, why the potential juror believed his client was to blame for her injuries, the woman snapped “Well, she could have picked a different doctor!”

    Defense attribution is a very, very hard thing to pry out of the human psyche.

  45. Do we have some screenshots from the game that this FTC case is talking about? I’m asking because I’ve played several of these pay to play games and it’s been fairly obvious to myself (33 year old adult) what was ‘coins/acorns’ and what was real money..

    ‘According to the complaint, kids’ games often encourage children to acquire virtual items in ways that blur the lines between what costs virtual currency and what costs real money. In the app “Ice Age Village,” for example, the complaint noted that children can use “coins” and “acorns” to buy items in the game without a real-money charge. However, they can also purchase additional “coins” and “acorns” using real money on a screen that is visually similar to the one that has no real-money charge. The largest quantity purchase available in the app would cost $99.99.’

    I only ask because it states right at the end of the paragraph ‘would cost $99.99’ That would seem like a pretty big indicator of how much/what type of a transaction you’re completing. Also are we sure these games are being targeted at children? Last time I checked children don’t routinely have credit cards and aren’t purchasing 200 dollar tablets.

    I’d also just like to point out that Apple’s store has the same 15 minute window for in-app/app purchases..

    I don’t have a Kindle Fire so I’ve no idea if you can disable it, 15 minutes of googling would probably provide me the answer but as I don’t own one and I don’t have kids I don’t have any reason to look it up.

    I’m really having a tough time seeing how Amazon is at fault here.. You have a device that is internet connected and can be used to make purchases of anything, not just kids games and you don’t put any kind of parental controls on it?

    Amazon even has FreeTime..

    I mean, at what point does it become the responsibility of the parents?