By Gautham Nagesh and Rolfe Winkler
Google Inc. has agreed to settle a Federal Trade Commission
complaint that it allowed children to rack up millions of dollars
in charges in its mobile app store without their parents' knowledge
or consent.
As part of the settlement, Google will refund a minimum of $19
million to consumers whose children made purchases inside
applications downloaded from the Google Play app store. Google will
also modify its billing practices to ensure it obtains express
consent before charging consumers for items sold in mobile
apps.
"As more Americans embrace mobile technology, it's vital to
remind companies that time-tested consumer protections still apply,
including that consumers should not be charged for purchases they
did not authorize," FTC Chairwoman Edith Ramirez said.
Many mobile apps and games sold in the Google Play store
encourage users, including children, to accumulate virtual items
that help them advance in the game. The FTC's complaint alleges
that when Google first launched its app store in 2011, it billed
consumers for these "in-app" purchases without first obtaining
authorization from the account holder.
Google said Thursday that the company has already made the
changes "to ensure people have the best Google Play experience
possible," a Google spokeswoman said. "We're glad to put this
matter behind us so we can focus on creating more ways for people
to enjoy all the entertainment they love."
Google said that it started rolling out the changes in March. In
the past, a Google Play user seeking to make an in-app purchase
would be required to enter their password the first time they made
a purchase and would be shown a prompt asking them whether they
want to be asked for their password for future purchases or
not.
When people said they wanted to be prompted for their password
each time, Google would only require them to enter it every 30
minutes, which the FTC felt was confusing and would have allowed
children to make multiple purchases in a small window. In the March
changes, made in response to FTC concerns, Google changed the
prompt so that when users requested to be asked for their password
for each purchase, Google would do so.
The area is of growing importance to the search giant. In-app
purchases on Google Play are now the second largest business for
the search giant, after advertising, according to people familiar
with the company's financial results. Credit Suisse estimates that
Google Play revenue will double in 2014 to $4.4 billion.
The FTC's action is the agency's third involving in-app
purchases by children. In January, Apple Inc. settled a similar FTC
complaint and agreed to refund a minimum of $32.5 million for
unauthorized charges and modify its billing practices. In July, the
agency filed a complaint in federal court against Amazon.com
Inc.
European regulators have also targeted the app stores. In July,
the European Commission forced Google to stop referring to mobile
games as "free" if they have in-app purchases. Google also promised
to develop guidelines to prevent app developers from targeting
children, and has changed the default settings on phones and
tablets that use its Android operating system to require approval
for every purchase, according to the European Commission.
Write to Gautham Nagesh at gautham.nagesh@wsj.com and Rolfe
Winkler at rolfe.winkler@wsj.com
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